Menu Close

Flat Rate Pricing and HVACR Repairs Part 2

Once an HVACR contractor has decided that flat rate pricing is the best way for them to serve their customers, provide a reasonable salary and benefits to the technicians they employ, and allow for their company to generate the profit they deserve, the next step is to figure out how to either design a flat rate program in-house, or  decide to purchase a system.

If your plan is to purchase a program, plan on spending up to $4,000.00 for a small company (more if you have more than a few technicians), plus a monthly fee for updates. The reason many systems are priced in this range is that it takes a good deal of research to design a program and determine what a given repair should cost based on a national average, and keep track of the changing price of parts costs. The advanatage of purchasing a flat rate management program is that it doesn’t take a Herculean effort to implement it into your company, and the updates keep you current on parts costs so you can maintain your goal of achieving a reasonable profit at the end of the quarter/year. Some programs may be available for less, and you need to do due diligence and research what is best for your individual situation.

In some cases, the specific label for such a program will vary. For example, if you are in a franchise system, it may be referred to as a “Menu” pricing system rather than a flat rate price guide, but the objective is the same. It’s pre-prepared for you, you plug it into your operation, and it is regularly updated to ensure the profitability of your company.

If you decide to creae your own flat rate pricing system, there are different ways you can approach the project. With the right computer skills and a familiarity with a program such as Excel, you could employ the spreadsheet system to list specific repair jobs and their relative labor price for accomplishing them, along with a price listing. Or, you could decide that your listings will be for labor only, allowing the technician to price the parts at the time the total repair cost is determined. An advantage of Excel, of course, is that you could plug in a rate that allows the program to calculate and list the cost of a given repair once you’ve assigned a time or other code to it. With this arbitrary number plugged in, your printed copy would show the repairs and their individual pricing according to that number. You can also implement a keystroke command into the system that allows you to plug a different number in, thereby changing all the prices to the new amount based on that number. You could also input a zone system that determines one price for a service call and repair at a given distance from your base, and a different zone price for  a repair at a distance further away from your location.

Another approach to designing your own flat rate pricing system involves categorizing the repairs you accomplish. In this type of a system, the higher the category number, the more difficult the repair. A category one repair, for example, would be the simplest part replacement you could accomplish on a given piece of equipment, such as a contactor on a condensing unit. A more complex repair, such as replacing a blower motor, would be a higher category number. And, an even more difficult repair would be a higher category number yet. In most cases, a service company could come up with a category listing of 1 through 6 and cover most of the repairs they do, up to and including sealed system repairs.

Designing your own flat rate pricing system requires a lot of knowledge and will take a lot of work. You will need to be vary familiar with the type of equipment you work on, and create an individual listing in various categories for each of them. For example, if you service gas furnaces, you’ll need to create a listing page for that equipment type for all the category one repairs you do, then create a second page for the cateory two repairs, and so on. (Separate pages will make your listing print in a less complicating manner.) And, if you service heat pumps, the page creation system is again accomplished, likewise for walk-in coolers and freezers, ice machines, etc….

You’ll also need to come up with an hourly rate (even though you’re not charging by the hour) so you can decide what you need to charge labor-wise for a category one repair, category two, etc… (Like I said, this will take a lot of work.) To come up with the hourly rate that you’ll plug into the given category of repair, you’ll need to have a good understanding of your cost of doing business. For this information, you may have to seek advice from an accountant, or do whatever it takes to list and understand all of your costs, then determine what your labor repair rate has to be to cover those costs and provide for a reasonable percentage of profit for you.

The advantage of designing your own flat rate price guide, whether you go with a spreadsheet system or use a word processing program such as Word, is that what you’ll have in the end is something that is custom designed for your business without any program elements that you don’t need or want.

Once you’ve either purchased or designed your own flat rate pricing system, the next process to consider is implementing it into your business, which is a subject I’ll discuss in the next segment of this series.

Learn from yesterday….Live for today…..Look forward to tomorrow.