Since publishing this article on flat-rate pricing, I’ve regularly received emails asking for recommendations and advice.

Hidden in these emails is the same plea: “Help, I’m burned out.”

And then, “I think flat-rate is the answer.”

The answer to what, exactly?

Yes, I believe most plumbers should consider flat-rate pricing. I also think there are some issues that a price book won’t address. Flat-rate is a great tool, but it isn’t a silver bullet.

What Flat-Rate Does

Flat-rate is an estimating and invoicing method. It is a framework for pricing jobs that simplifies training and is natural for customers. But it is not a magical cure-all for bad business.

Flat-rate does the following:

• Simplifies invoicing
• Builds customer confidence (When used correctly; in the wrong hands, the experience may have the opposite effect.)
• Prevents nitpicking prices
• Rewards fast and efficient work
• Makes it easier to raise prices

Anyone who has ever argued with a customer over a faucet price because “I saw it cheaper on Amazon” will appreciate the benefits of the flat-rate approach. The customer can’t nickel-and-dime you or argue over time-on-the-job. They don’t have to understand that watching glue dry is a valid and necessary part of the process.

Another top benefit is that more jobs in a day means more profit, rather than shifting a billable hour from one customer to the next. Flat-rate pricing balances the scales of experience that were inherently flawed under hourly billing. Your customers aren’t penalized for getting your slowest plumber, and your most-experienced guy rightfully becomes your top-earner.

Companies that switch to flat-rate pricing report fewer customer complaints about pricing and higher profits. Almost sounds too good to be true.

But there is a lot flat-rate doesn’t do. For example, it doesn’t:

• Get you five-star reviews
• Change the fact that you are undercharging
• Save you from bad diagnostics
• Motivate unmotivated employees
• Help you manage your inventory
• Fix your operational chaos

These are all common symptoms of poor management practices that plague our industry. Be sure you are placing the blame correctly before you decide what path will save the day.

Before you decide to switch to flat-rate pricing as “the answer,” you must consider these common concerns.

Flat-rate doesn’t give you a five-star review.

Many companies report fewer customer complaints about pricing under a flat-rate system. That doesn’t mean your employees learned how to smile, explain their repair, or otherwise perform customer service. If your reviews aren’t about pricing and rather a result of bad customer service habits, lack of training, or your own low expectations, flat-rate won’t help.

Flat-rate doesn’t change the fact that you are undercharging.

More than likely, it will magnify the problem. A flat-rate price book takes data about average job completion times and typical materials and does the calculations for you. That’s it. It’s not magic, it’s math.

So if the hourly rate that your prices are based on doesn’t leave room for profit, there won’t be any profit. What flat-rate will do is give you the courage to raise your prices. You don’t have to utter that hourly rate out-loud. You don’t have to scare your longtime customers or hear, “My lawyer doesn’t even charge that!”

Flat-rate doesn’t improve your diagnostic skills.

Typically flat-rate is used to give your customers a price early on in the appointment. Agreeing on the price before the work starts is how you avoid billing disputes.

Typically, the recommended workflow is:

Step 1: Perform a diagnostic (often for a fee).

Step 2: Provide recommendations and pricing.

Step 3: Complete the repair.

Using this formula, your team’s ability to accurately diagnose issues from the start becomes paramount to success.

Set your employees up for success with adequate training, choosing the right price book vendor, and implementing the process well. These are all keys to success.

But they will be charged with correctly categorizing the task before the work begins, which takes experience and practice. At the end of the day, you need talent.

Flat-rate pricing won’t motivate an unmotivated employee.

If your employees are disengaged and disinterested in company success, flat-rate pricing is just putting lipstick on a pig.

Motivation and morale are people issues, and a different billing process doesn’t fix people issues. The only way to salvage those employees is through conversation, care, and training. But you can’t save everyone.

Introducing a flat-rate system to a disengaged employee may add friction. Change is hard, and you are asking them to change their entire workflow. Get in there and talk it out.

Flat-rate doesn’t help manage inventory.

If you relied on invoices to provide detail on what parts were used on the job, flat-rate is going to let you down. While we are at it, your materials job costing is going to be off too.

Streamlined and simplified invoicing means less detailed invoices. It helps to think of these as two separate areas of management instead of making them part-and-parcel. It’s impossible to have a task for every variation of a service project. There are too many options and variables. The result would be a price book so big and clunky it’s useless. There are other ways to track inventory if you are into that sort of thing.

Flat-rate doesn’t fix your operational chaos.

If your office is a mess, a price book won’t fix it. It won’t change the fact that you are in hot water with the IRS, behind on paying your suppliers, and haven’t sent an invoice in three weeks.

Arguably, flat-rate might help you get paid faster, but — in these examples — that isn’t the problem. These are process problems of a different kind. Get yourself help, get organized, or dedicate more time to office tasks.

The Final Takeaway

Flat-rate pricing is a tool in your business toolbox. The benefits are fantastic, but it’s not a cure-all.

It isn’t the silver bullet I fear a lot of plumbers are searching for.

About the Author

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