changing my price structure--opinions?

[huggytree]

due to the high cost of my new website I am considering adding a 3rd price category
I am currently $94 for new homes($94 is my actual cost), $107 for remodeling & service

I am considering going to $125 for service work

I will be getting into the higher end for pricing....right now $107 is middle of the road

I do get some customers complain that $107 is too high...not many, but a few...

I will lose customers @$125.....I definitely think so.....how many? who knows

it IS common for plumbers to have 3 pricing categories, so what im considering is what most plumbers do

does $125 seem extreme (+ $60 trip charge)



another idea that ive been considering for a while is not give bids on the phone or do jobs @ T&M
Change it to a 100% estimate/bid.....so when a customer calls I don't give them a price...I tell them I need to charge them $60 to come to their house, then give them a bid...if they accept the bid I do the work and deduct $60 from it....if they say 'no thanks'' I charge them $60 and go to the next job....id most likely need to get a credit card # over the phone ahead of time to make sure I got my $60

its a very common method with the mega large service shops....this way I can hide my $125 labor rate...and if the jobs get done early I make extra $$..

I never make much on service....ive always considered it 'filler'.....by upíng the prices it actually makes it attractive


I most likely wont try this method at this time, but im considering it...the flaws are with scheduling and me being a small company.....how can I plan my day if I don't know if I have the job yet or not?.....id have to schedule extra jobs each day and assume 1-2 will say NO....if no one says no then im working until 8pm

another way to 'hide' my $125 per hour is to try to come up with MORE flat rate pricing on common tasks....I already do on lots of things, but its impossible to when someone calls and says ''a pipe is leaking'....that pipe could be a 10 minute fix or a 8 hour fix....you need to see it.....by telling the customer a hourly rate and that I will just T&M the job its a honest/accurate way to go...I cant lose $$.....


1 final way to fix my service cost issue is to dramatically markup the parts....right now its 100% on small items and 50% on middle priced.....I could easily tack on $50 to many jobs in parts w/o too many questions.........it depends on the size of the job....maybe go to 200% on smalls and 100% on middle

everyone shops by hourly rate for these jobs....not by parts

any thoughts?

[Harold Mansfield]

I have no idea what plumbers do, so what ever you think you need to do, do it.

If, however, you are using a new website as an excuse to raise your rates permanently? That's a little anal compared to how well you always say you're doing.
If I raised my rates every time I had to buy a new piece of software, or license for something, I'd price myself right out of business.

If you were buying some new equipment that allowed you to provide an additional service, or added convenience for the client, I'd say that's justified.
You shouldn't be paying so much for a website that you need to up your rates to finance it.

But honestly, whether or not you raise your rates is not something where any of our opinions matter. We don't live in your area, know your expenses, nor do we know what the going rate is.
You could say $200 an hour and I wouldn't know if that's fair in your area or not.

[huggytree]

i know where your coming from Harold, but im just looking for a gut feeling

i disagree about adding to my hourly rate to cover my internet costs

im going to be spending 8+hours a month + extra costs for the web site company to manage it.....+ i need to cover the website costs...im guessing a website is good for 5 years, so ive divided it down

i need to cover approx. $1,000+ a month for my time and expenses for my website....its my advertising....that cost gets passed down to my customers....i typically work 100-130 hours in the field....only 20-30 hours of that is service.....even raising my service work hourly rate by $18 an hour wont fully cover it


i will most likely be dropping my church and local phone book advertising for 2014....this will get me $200 a month back in advertising that's already included in my hourly rate.....and as service work increases it will most likely make up for the $1000 a month

its not a new piece of equipment....its advertising....advertising=customers pay for it....just like they pay for my uniform and my business cards

[Harold Mansfield]

I say charge whatever you can get and still keeps you busy.
I'd adjust that 5 years on the website thing though. 5 years ago was a lifetime on the web.
But if you use a CMS, you can keep the cost of redesigns and updates to a minimum and get a long life out of your original installation.

[Mr Rewire]

Have you considered going to a flat rate system?

[Gabe]

Like Harold, I don't know much about plumbing either, but is there any way you can modify your value proposition so you don't have to compete on price? Or is it pretty much a true commoditized field? In our business it's a race to the bottom for those that compete on price.

Is there a guarantee of some sort you can offer that customers will value that doesn't cost you much to offer? Do you have better licensing? What if you made tutorial videos for common plumbing tasks on your website targeting local customers so they saw you as a trusted authority rather than just another plumber?

What if you had an online e-estimate form to make estimates easier? What if you let customers video record leaks/problems over Skype or FaceTime (essentially a video phone call over their smartphone/tablet) so you could tell them what to show you and give them a better estimate in a shorter time? Sure most of your customers may not know how to use that technology, but imagine how fast the word would spread by those who do. I bet the news would even want to do a story on it (or maybe this is already common, I don't know). I don't know if those suggestions are complete garbage or not, but if you could differentiate yourself and earn trust you could charge a premium. Hope this helps.

[Harold Mansfield]

What if you had an online e-estimate form to make estimates easier? What if you let customers video record leaks/problems over Skype or FaceTime (essentially a video phone call over their smartphone/tablet) so you could tell them what to show you and give them a better estimate in a shorter time? Sure most of your customers may not know how to use that technology, but imagine how fast the word would spread by those who do.

That's good stuff. I've been trying to get people to do more things like this for a couple of years now. Sadly it's slow going, but I love it when people embrace the tools available to them and start thinking like this.

You're right. Many people won't use it, at first. But the ones who do ( and if you do it well) , will rave about you.

[huggytree]

my guess is less than 20% of my customers would be able to take a video of the problem for me to see and put it on skype...its very interesting though....definitely not done by anyone else

the way i do small service jobs now works....i don't make much, but i also NEVER lose anything......

ive pretty much decided to just raise my parts price...customers NEVER ask about anything except hourly rate and few make a big deal about what i currently charge....so $1-$10 is 200% markup(was 100%)......$10-25 is 100% markup(was 50%) ....$25+ is 50% markup(was 35%)

it works the exact same as raising my hourly rate, its hidden and i doubt it will too notable on the typical $200-$400 project

i have flat rate pricing on many of the typical service jobs (ie: waterheater replacement)....i will raise those prices just a bit as well....its 1 month away from the yearly raise time, so i will be redoing all my pricing anyways....ill just tweak it up a bit more

[Steve B]

Your expenses have nothing to do with what you can/should charge people (but, I'm sure I've gone over this before). The market forces (i.e. supply/demand) are what determines what you can and should charge. If you raise your prices (regardless of the logic) you will see if your overall profit increases or not. If you raise prices and profit goes up - you might consider raising them even more. Of course, the opposite could be true. None of your customers care how much your expenses are.

Also, I wouldn't judge your customer's opinion of your mark-up on parts based on what they tell you. There are lots of businesses I will never buy from again because I didn't like something about their price, product, or service, but I've never told them my opinion. As a matter of fact, I probably had a smile on my face the last time they saw me. It might have only been after I went home and looked at the receipt or called around and checked on things that I decided I didn't like something.

[Mr Rewire]

In the world of trade service doing work at T & M will never be profitable the thing that most service companies miss is the idea that you only have around four billable hours for a service truck. The next problem is overcomming customer objections to an hourly rate that is often much higher than what they earn per hour. Even a single truck operation has expenses associated with operating a business and when you add up these costs along with paying yourself and a profit after you will find ythat often your "hourly" rate is over $200.00. Now you work in an area where everyone usuedd an hourly rate and it can be half what you actually need so what do you do?
Most successful plumbing and HVAC companies found the secret many years ago and that was to charge from a flat rate book. We all have seen these at the local garage when getting aour car serviced. The idea is fairly simple you have a price preassigned to every task and all your operating costs ,material and profit are all ready factored into this price.

[huggytree]

Most successful plumbing and HVAC companies found the secret many years ago and that was to charge from a flat rate book. We all have seen these at the local garage when getting aour car serviced. The idea is fairly simple you have a price preassigned to every task and all your operating costs ,material and profit are all ready factored into this price.

the problem with a flat rate book is many (50%) of the time you don't know what the project is until you get to the house....the homeowner rarely describes the problem correctly.... im going to a job tomorrow morning where she said a faucet needed rebuilding....but then said the words tub and shower too....when I questioned it she said 'no its not a tub/shower its a faucet on a sink''......after FURTHER questioning she admitted IT IS THE TUB/SHOWER valve that's leaking....people are odd....they don't know what they are talking about many times.......a nd what brand name or how old is that tub/shower valve? will I have the part on my van or will I have to drive to a supply house....or even order the part and come back another day....none of this is known over the phone.....

how many people will pay $60 for me to come over and give them a flat rate price???(ive been considering doing this for a while)

and how do I schedule my day not knowing how many will say yes to the price and no???

I may have 10 jobs lined up.....day 1 I could sell all 10 jobs and work 10-12 hours.....day 2 I could sell 2 of them and be done working at 9am

scheduling would be a nightmare....flat rate wont work for a small 1 man operation(in my opinion)


Steve----your right........but im at the point now where most/all of my customers are repeat/referrals....the pricing issue isn't as important as long as it doesn't get too high priced.....I add up all my expenses yearly and set my yearly wage increase accordingly....I keep my exact same profit %

[Mr Rewire]

the problem with a flat rate book is many (50%) of the time you don't know what the project is until you get to the house....the homeowner rarely describes the problem correctly.... im going to a job tomorrow morning where she said a faucet needed rebuilding....but then said the words tub and shower too....when I questioned it she said 'no its not a tub/shower its a faucet on a sink''......after FURTHER questioning she admitted IT IS THE TUB/SHOWER valve that's leaking....people are odd....they don't know what they are talking about many times.......a nd what brand name or how old is that tub/shower valve? will I have the part on my van or will I have to drive to a supply house....or even order the part and come back another day....none of this is known over the phone.....

how many people will pay $60 for me to come over and give them a flat rate price???(ive been considering doing this for a while)

and how do I schedule my day not knowing how many will say yes to the price and no???

I may have 10 jobs lined up.....day 1 I could sell all 10 jobs and work 10-12 hours.....day 2 I could sell 2 of them and be done working at 9am

scheduling would be a nightmare....flat rate wont work for a small 1 man operation(in my opinion)


Steve----your right........but im at the point now where most/all of my customers are repeat/referrals....the pricing issue isn't as important as long as it doesn't get too high priced.....I add up all my expenses yearly and set my yearly wage increase accordingly....I keep my exact same profit %Actually flat rate was designed to work best for the one man shop. We charge a $69.00 travel charge that gets our guy to the door if we need to trouble shoot we have a flat $98.00 diagnostic charge. Once we find the issue we then price the repair from our FR book. Our average ticket is $450.00 we do no more than four calls per day at an average of $1800.00 per service van . We do not price over the phone and we do not give out an "hourly " rate.

[Wozcreative]

Here in toronto it is common that the rate is $150 minimum to come and look at the issue... so I dont think any of us can tell you that $107 is a right price or $96 is.. it is all dependant on what it costs you to do the job. Just focus on a minimum price for a job to diagnose it, if they aggree to the minimum, then they WILL go with you to fix the problem, you're already there and they've already spent the time with you to look it over.

[billbenson]

Here in FL I have never heard of a charge to come out and look at the project. The hourly rate is about $60. Glad I don't live in WI

[MyITGuy]

Here in FL I have never heard of a charge to come out and look at the project. The hourly rate is about $60. Glad I don't live in WI

Same here (Also in FL) - Had several plumbers over regarding a slab leak I had, not one of them charged me to visit my location (Also applied to some electricians and other general construction I needed). IMO, this is part of a marketing expense and if its not something that you think you want to handle because it takes away from your billable time/revenue, then maybe you should hire a low skilled person to visit the location, document the information you need to generate a quote and go from there.

I will note, the only time I got charged with a service call is when my A/C broke on July 4th and they had to come out during a holiday when their business was closed. I ended up having to purchase a new A/C and the service charge was deducted from the overall price

[Mr Rewire]

We started the trip charge two years ago and found little push back from clients. The advantage was it helped weed ouit the tire kickers and we wwere rolling only to serious buyers. We started with $45.00 and would apply it to the job cost if we did the work after we found littkle resisitance we stopped bonusing it back and have raised it to $69.00.

[huggytree]

We started the trip charge two years ago and found little push back from clients. The advantage was it helped weed ouit the tire kickers and we wwere rolling only to serious buyers. We started with $45.00 and would apply it to the job cost if we did the work after we found littkle resisitance we stopped bonusing it back and have raised it to $69.00.

what do you do if all 4 calls that day say NO?

what do you do if you have #2 scheduled for 10 am and #1 says NO??? just sit for 2 hours?

I typically make $1,000 a day for labor....maybe $1,500-2000 net

so your #'s aren't much different than mine....we may be equal

id really like to do it, but I see many flaws in the concept

I see exactly how it works for a very large service only company that spends tons on advertising....you could charge enough to have guys sitting around just waiting for the next call....I am never sitting around waiting for a call

even to replace a water heater you go and show up at their door first??? do you then go pick up the heater and spend 1.5 hours driving back and forth to get it?

[Freelancier]

what do you do if all 4 calls that day say NO?

You look to increase the number of calls you get in a day.

I have a theory that there is always some person out there willing to overpay for some piece of junk that I'm trying to get rid of at a garage sale. My job is not only to make sure that person hears about my garage sale, but also identifying that person from the other people who will pick up the piece of junk and then put it back down once they hear the price I want for that piece of junk.

Your job as a business owner is to find the right clients for you, to make sure they hear about you, to weed out the people who will be "tire kickers", and to appropriately charge the people who really want to buy what you're offering.

Worrying about "what if the tire kickers don't love me?" is silly.

[billbenson]

It sounds like because of the rural nature you work in driving time is much more critical. Also you are in a union state. You have found a business model that works for you and the area you live in. It would never work here. But congratulations. You have a model that works well for you there!

[Mr Rewire]

what do you do if all 4 calls that day say NO? reschedule tommorrows calls for today


what do you do if you have #2 scheduled for 10 am and #1 says NO??? just sit for 2 hours? call #2 and say Can I come early


I typically make $1,000 a day for labor....maybe $1,500-2000 net 12 to 16 hours a day?


so your #'s aren't much different than mine....we may be equal I would guess I put in alot less hours


id really like to do it, but I see many flaws in the concept I would enjoy further discission


I see exactly how it works for a very large service only company that spends tons on advertising....you could charge enough to have guys sitting around just waiting for the next call....I am never sitting around waiting for a call we are a four truck operation and nobody is sitting. We use successware21 to track dispatching


even to replace a water heater you go and show up at their door first??? do you then go pick up the heater and spend 1.5 hours driving back and forth to get it?If the call was for a bad water heater I would show up with a water heater on the truck. When you say I have a new one on the truck and can have it installed right now you are probably going to get the job.

[huggytree]

a typical work day for me is around 6-7.5 hours in the field..i may spend 1-2 hours at home doing bids...some nights 0, some nights 1-2

I typically work 1500 hours a year in the field....my company grosses $450,000-550,000

large remodels is where I make most of my money...I bid for an ''average' plumber and if I get the job done early its all in my pocket...I can typically get new homes done 10 hours early and many remodels I can get done 25%-45% quicker...

I don't have a lot of service work only days....most days its a bath redo (installing a new tub/mixer) and then off to 1 small service job.....most likely done by 2pm



for a 4 truck operation I can see your plan working just fine.....you have a dozen calls coming in a day....right now I have 1-3 calls....many days 0 calls

66-75% of my work is remodelers....for your plan to work you need huge call volume..

what is your yearly advertising budget? (ive heard some local ones are $100,000)

mine is $3,000 right now because I cant find anything that really works

[Mr Rewire]

Here is where it would be of benefit for you to departmentalize your financials. We found that although construction brought in more revenue it was at a much smaller margin. I think using a flat rate system would help you to maximize the small number of service jobs that you do. As for advertising it is determined like everything else it is based on a % of our gross we target 8% and all advertising is closely tracked by our call center.

[huggytree]

Here is where it would be of benefit for you to departmentalize your financials. We found that although construction brought in more revenue it was at a much smaller margin. I think using a flat rate system would help you to maximize the small number of service jobs that you do. As for advertising it is determined like everything else it is based on a % of our gross we target 8% and all advertising is closely tracked by our call center.

it would help maximize it, yes I agree(if it works in my area)

but for something like a waterheater...I cant just pick up waterheaters and drive around with them hoping to sell them...I do have a shop (2 story minibarn), but its packed....I cant store 5 models of water heaters.......

at my size I cant do the efficiency's you do to make flat rate work......

as far as margin goes for remodeling...I can make 30-40%....on new homes its 10-20%

im extremely pleased with that %...

ive never sat down and exactly figured out my % on service, but id guess its 20%...depends on how many parts I use in that particular job

I got paid $166 yesterday for 20 minutes of work just helping a customer figure out where the water damage is coming from (cracked grout)