Steve Payne
A new slick scheme called Straightforward Pricing
Canadian Contractor Estimating Business Service"Under straightforward pricing, contractors go away from charging by the hour but, instead, go by a price list with different tier levels at that also includes a diagnostic fee, as if they were doctors," Kevin Koch reports to us.
This post about a pricing method used largely by plumbing and heating contractors is from Kevin Koch of Koch Excavating. Let us know if this would work for your business.
Some contractors charge the same fees as doctors and lawyers – and even higher. How does a contractor charge more than a doctor?
It’s easy.
Many plumbing and heating contractors have bought into a new slick scheme called “Straightforward Pricing.”
“Straightforward Pricing” is trademarked. Under this new scheme, the contractors go away from charging by the hour but instead they go by a price list with different tier levels that also includes a diagnostic fee, as if they were doctors. Straightforward Pricing contractors pay monthly fees for support and training on how to maximize profits. Some of these contractors have taken their pricing to a whole new level.
Here is an example of how Straightforward Pricing works:
My 84 year-old friend called a heating contractor to fix her furnace. The contractor was on-site less then 30 minutes, no new parts were used, yet the bill was an alarming $738.00. The contractor charged a diagnostic fee and used their Straightforward Price list to arrive at $738.00 for the service call.
Bottom line is that you should not compare a blue collar or white collar profession and try to put them on an equal playing field.
You have to do your homework in hiring a doctor, a lawyer or a contractor because there are dumb ones in every profession.
I have learned that the amount of money anybody charges has nothing to do with your expectations.
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We have used UP Front Pricing since 1995 here in Canada. Our customer’s are quite favourable and appreciative that we are able to provide a price to them prior to any work commencing. The customer is not held hostage by a “houseguest” or typically slower technician. As well in the service business those companies that charge by the hour are reasons why the consumer gets nervous and has concerns ( clockwatching), especially if the technician needs to leave the property and pick up materials that he/she may need and not have with them. We have our assigned fee to come out and assess the situation and then provide the customer the options to provide the solution. If the customer feels that they wish to call in another individual because they are not comfortable with the price given, it is their choice to agree or not. Once the price is given that is the price they can expect to pay. If your technician is very efficient, yes you can make a good margin but also remember that things can go not so well, therefore you lose your potential margin.
This system then also gives credibility in that you are not making up numbers or providing a “budget” that can change. We all know what happens when you try and ask for more money than originally estimated. We have less than 2% in calls back from customers complaining of the price. You will experience that no matter what. When we were T & M we were constantly getting called by customers complaining that we charged x dollars for x hours time. Customers have a poor perception of time and only calculate the actual time at the property. They don’t take into account the travel etc. and when we used to explain how our charges worked, we always had complaints.
It also provides a uniform way to price out a job. Sometimes companies like to “charge by the neighbourhood”. I’m sure we have seen that once or twice- especially in a very affluent area of town or how busy we are. Straightforward eliminates all that.
Straightforward Pricing has allowed us to calculate our true costs of doing business and allow us to make a profit, provide good warranty for our customer and be able to have our workers to earn a decent living.
After all why shouldn’t a tradesperson earn what he/she is worth. There is as much schooling/education and training involved as a doctor or lawyer and when it comes to the trades ,the plumber,electrician,mechanic is not held in the same regards as the other “professional trades.
I love when we get a customer telling us that no person is worth more than $40 per hour. Maybe in 1960!!
We would love to move towards Straightforward but have no idea where to start! I can’t wrap my head around it. We are in Canada too… seems harder to find good resources here than it would be in the U.S.
I can’t imagine how this would work for remodeling, where there are so many variables, and every job is unique. Plumbing and heating – not at all comparable.
I’ve been to these meetings where they push this method of billing
prices are very high
it may work in a big city,but not in a small town where ever one knows everyone
one contractor was using this system for his plumbing service company but said he very rarely had clients call back for more work
I told him he was too costly to hire
there is always room for honest service companies to charge a fair amount to cover there cost and have money left over
the trick is to be HONEST
Many Plumbing companies in the GTA use this scheme. Just so you are aware, majority of these “straight forward” pricing companies are affiliated with American based “scam schools”. Plumbers success is one school started by some Mike Diamond fellow, that basically takes these companies under their wing for a fee (50k) is magic number I hear, which is ripped back to the customer anyways. They do have a Canadian wing, run by a fellow that he himself has a failed plumbing company (go figure) he is also taking roofing companies into same black hole. They teach these companies how to conduct business, price etc. So to sum it up, if you see a company with the- plumbers success, roofers success, SGI , clockwork etc…which majority advertise on their websites or brochures, be expected to get hosed.
As in every business there are those who are reputable and those who are not. We are very familiar with that group which BTW was purchased by Direct Energy. There are many different systems out there. The key is to find the one that the individual is comfortable with and has a good code of ethics. In our own case we have tested a couple of different providers until we found the right one for us.
We have used UpFront/Straightforward Pricing for almost 10 years now and it is definitely the most fair method of pricing for both the customer and the contractor. Our price, provided to the customer before the work begins is a quote that we stand behind, so nobody has to watch the clock. Because it is a published price, it assures the customer of consistent pricing regardless of which neighborhood they live in, what time of year it is, how busy we are or which technician we send out.
We also have a diagnostic fee which is required when the cause of a problem is not obvious and requires the technician to do more testing and trouble shooting. The goal is always to find the problem in a reasonable length of time but we once spent a day and a half trouble shooting an elusive problem for $237. The repair (once it is determined as to what is required) is over and above the diagnostic and that price is also published so you can’t make up your losses when a job goes sideways. Ultimately, we did finally solve the customers problem, we stood behind our quoted pricing and we have a happy customer. So Edward, your exaggerated generalizations are rather unfair.
I can’t speak for the company that served Kevin’s 84 yr old friend or what the service call actually consisted of. I think Kevin or his friend should ask for more details, but our customers find Straightforward Pricing is a fair system. Like Joe says, it comes down to the ethics of the company using it.
Ray, I have been in the trade for sometime. I have worked with a few plumbing companies in that time. I also know what said companies are charging. I have even been to these “scam school courses” which basically teaches you how to be a convincing car salesman errrr plumber. Are you going to tell me it takes 2 hrs and $350+ to replace a customer supplied kitchen faucet? Which on average takes me 1/2hr-3/4hr and no parts to boot (new faucets hoses built in). & only warranty you get is the bolt on faucet is tight. You gonna tell me that it costs $350+ to replace a customer supplied toilet that takes me 45min? At most! No parts either. I can give you a whole list of things, that I still have copies of what these guys charge for really basic stuff. As all the literature was given to me to “learn”. The only thing I agree with is service charge fee, which all my customers pay to cover my gas if they DO NOT accept my quote otherwise it is waived.
W5 did a show on plumbers a couple years back, a few of the companies showcased by hidden cam were “scam school graduates” in the GTA and they all failed miserably. everything they did was taught, not bad diagnosis, that I can assure you as I have worked in those environments. Honesty and integrity goes out the window with these straightforward price nonsense, when employees are given commission or “bonuses” on sales (no such thing as “commission free” its just masked with a different word “bonus”). Why replace a FREE moen cartridge for $180, when they can sell you a $700+ for a bottom of barrel kitchen single handle faucet and make triple the money? I know the game, I know the schtick… No one can tell me otherwise.
What irks me, is Companies pay 50k? Or whatever it is to these american scam school companies and none of money goes into OUR economy and pushed over to customers who pay double to cover that cost. Yet, companies are taught to line pockets & point fingers at us smaller plumbers (I can name a few but just visit some of their websites). I am very busy and take pride in my work. There is very many of us, that provide cheaper and better service than any of these “scam schools”. At same time, a few of these companies also hire joe blows “masqueraded” as plumbers to snake drains etc but have no license or apprenticeship. Just a crash course on how to sell and deemed “certified” by their boss…..
No new parts for a toilet or faucet install? Even if our customers supply the faucet or toilet we always install new supply lines (not the cheap ones that come with the product), foam gaskets, etc. If our guys installed a toilet without changing out old supply lines they would be going back on their own time to fix it.
Do you run your own business or just work for someone else? If you have only ever just been an employee, I can see where you think these numbers are out to lunch — but what you are forgetting is how much it costs to keep an employee in a van and have high quality, well maintained equipment for the technicians to use. If you are looking at those rates purely from the point of “what you get paid” then I can see why you are so bitter but you need a reality check.
If you’re in the residential service business then SFP is the only way to go, I work in the commercial sector and we charge by the hour (no problem) but sometimes I do a residential call which we also charge by the hour, it doesn’t take long before the resi customer complains about the bill because I was on the phone for a minute or I used the bathroom or I went out to my van, etc, etc
SFP eliminates unnecessary complaining from customers, the last thing you want is some customer standing behind you, looking at their watch and complaining that you’e too slow for their wallet.
If SFP is charging higher rates I would think it would allow competing small contractors to raise their prices (assuming they provide a comparable service) and finally make some profit instead of working for food on the table. If your trade requires a 4+ year apprenticeship with schooling, exams and additional training to keep up with regular Code changes, your pay scale should be that of a professional. It should be an embarrassment to the trades that the janitor in a hospital makes more money than you do.
I think its time to quit complaining about the other guy, and start running our companies like the specialized trades that they are. Provide exceptional workmanship and “blow they socks off’ kind of service, and people will be happy to pay your prices and call you back.
Well put
We tradespeople seem to be the last businesses willing to expose ourselves to the perils of T and M. Last winter we had an ice storm in Toronto. The media and politicians heaped the praise on the utility staff and most were paid double and triple time. And they should be as many had the week off for Christmas holidays.Yet when the criticism came it was the private Electrical Contractor’s that got it! The Ontario Electrical League actually received a letter from a city staff member inquiring about pricing and complaining about gouging. Those people who agree to a price and later complain are the same people that would complain no matter what your rate is. Those tradespeople who support them are usually financially struggling and they drag us all down. Mr. Koch seems oblivious to what Doctor’s and Lawyers actually charge.
People that do not run a business, should never speak on those that understand what it takes to actually run one.
What Plumbing contractors do is safeguard the health of a nation…they deal directly with issues which can cause poor health and, in the case of e. coli contamination, potential death…every day and potentially every job. Their dedication is to protect the lives and quality of life of their client base through attention to detail and the consistent quality of their repair and maintenance issues in their customers’ homes. You are right, they should not be compared to doctors…because doctors only treat the symptoms…plumbers prevent the illness in the first place. Without water there is no life. So this particular “blue collar job” should no be denigrated by those that believe it is merely glorified labor and should be cheap. Instead, you should be asking if you are actually paying enough for what you are getting…how much is your life actually worth? Only you can answer that.
I really don’t like the prices mentioned above in the example of “Straightforward Pricing.” In my line of work, I’m able to give the customer a quote for the job, rather than an hourly rate. I realize that is not always possible depending on what’s being done.