Where Good Neighbors and Good Servicemen Meet
Contractor Pricing
The Christian Work Ethic
Jesus was a carpenter, and I'm sure He charged for His work. But His first priority was meeting the needs of His customers. Scripture confirms what I said as follows:
I am among you as the One who serves. Luke 22:27
Not everyone operates from a Christian Work Ethic. If profit is the primary objective, it will affect both the cost of the job and the quality of the work.
I Can Make Millions
Are You Aware? Hundreds of repairmen nationwide have been trained to sell repair jobs at inflated prices. Again and again, as a repairman, I receive solicitations inviting me to sign up. For a monthly fee they'll teach me lucrative marketing strategies. I am told I can make millions. My auto repairman tells me, he too, receives these "invitations."
I hear lots of stories, but this one really got my attention: A Detroit woman was said to have paid $10,000 for a residential gas furnace installation. (Recently I replaced one in College Station for about 1/6 of that amount.)
What Would it Take?
For me to make millions! If I double the price for each job, I can make five times the profit. Let's say I do a $100 job. After expenses, my profit will be about $25. If I do the same job, but charge $200, my net profit will be $125—five times as much!
Let's say I double the price, and drive away half my customers. I would still make 2.5 times as much as before. In fact, if I only do a fifth as much work, I'll make the same profit as before.
Whether the contractor makes the same profit or makes millions depends on how hard he's willing to work, and how effectively he markets his services.
Most people don't want to pay inflated prices for repairs. As always, we recommend you find someone you trust. The information that follows will help you do that.
Pricing Techniques
"Time & Material" and "By the Job," are conventional pricing approaches that have been with us forever. "Flat Rate Pricing" is relatively new. If your repair job is an emergency, you will probably accept whatever price you are given. If you call the right man, he won't take advantage of you.
Time & Material
For each service call there is a minimum charge. But the technician's time can be used for both diagnosis and repair.
Technical Service = Hourly Rate x Time Spent.
Material = Parts, Supplies, & Equipment.
The customer gets a complete itemization which includes labor, material, and sales tax.
By the Job
Sometimes a customer will ask for bids from different contractors. It will be a Time & Material calculation, but there is no itemization.
Since there is no itemization, sales tax is paid on the wholesale price of purchased items rather than on retail. The savings to the customer can be considerable.
By the Job can also be used for non-bid situations. For example, repetitive jobs like replacing a fan motor are easily quoted and then performed on the spot.
Flat Rate Pricing
In Flat Rate Pricing, there is an initial diagnostic charge. Once the analysis is complete, the contractor has a book which shows the flat rate price for each item—something like ala carte in a restaurant. The customer is then told what the job will cost before the work is done.
I have problems with this type of pricing for a number of reasons. Those who use Flat Rate Pricing cannot become Preferred Kontractors.
A Clarification
Your auto mechanic has a flat rate book that lists the hours it takes to do a certain job. He multiplies the hours times his rate and gets the labor cost for a potential job. That is good business practice. But the flat rate auto repair book is completely different from Flat Rate Pricing.
Premium Service
Some companies offer special incentives that are attractive: Examples include immediate response, one hour service, exact price before the work is done, precise scheduling, or technicians dressed like hospital personnel.
Please remember, these marketing approaches increase the cost of repairs. If you really want this type of service, you should be prepared to pay the extra. One customer told me he needed someone desperately, and gladly paid the price.
Word of Mouth Pages
Entry Level Advertising costs the contractor nothing. It's like a traditional Yellow Pages Listing. Accountability is minimal, and we expect more negative feedback.
The Preferred Kontractor has identified himself as responsible and accountable. We expect that most feedback will be positive. The Preferred Kontractor is obviously your first choice.
Once registered, you can leave feedback on any contractor, which can be read by any registered Word of Mouth Pages participant. We encourage you to register as a Kool Kustomer.
Kool Information that will keep you out of hot water,
Dr. Kool
