Flat rate is neither ethical nor unethical — it’s a tool

Sept. 10, 2013
I stated in a prior article that getting started in Flat Rate did NOT have to be a difficult all-at-once proposition, nor did it have to violate your ethical standards

I stated in a prior article that getting started in Flat Rate did NOT have to be a difficult all-at-once proposition, nor did it have to violate your ethical standards … arguably THE two most common reasons why individuals or small companies choose not to get involved with this best-of-all pricing methods. I'll elaborate some and then get you started on your first step.

Uh, the following may seem like heresy to you flat-rate “pros” who may be reading this, but too bad. Back off, this ain't about you (grin). We're going slow here.

We'll deal with ethics this time and how flat rate can be easily learned and taught later. For now, wrap your mind around the following, avoid the common mistake of “contempt prior to investigation,” and chew on this: Flat rate is neither ethical nor unethical. It is simply a pricing tool. Fact is, I can and will make the argument that time-and-material is much more of an inherently unethical pricing tool than Flat Rate.

Flat rate — you, not someone else, you! — decide a per-hour dollar amount based on what your present ethical stance dictates. We'll get to what's objectively vs. subjectively “fair” later, but for now let's take this one small step at a time.

Let's start. Write down five or 10 of the most common jobs you perform. This is the Flat Rate First Step I promised — write those five or 10 jobs down. Now, figure how long each takes. I can tell you where to get this information if you don't want to do it yourself, but for now let's use the replacement of a garbage disposer for example.

Start to finish, replacing a garbage disposer should take no more than a 1½-hours.  The time may vary slightly from person to person, but I think this is pretty accurate.  For the sake of simplicity, say you normally charge $100 an hour T&M and feel more is unethical or the market won't bear an increase — then don't change a thing! Just realize this job is almost always $150 labor. Now, add whatever cost of a disposer the customer decides on plus miscellaneous parts — say another $175 for parts and an inexpensive InSinkErator. With T&M the total for that job will not vary much, plus or minus, $325. With Flat Rate it will always be $325! It really is this simple.

Now let's examine the ethics. Mrs. Jones is elderly, has a limited income, and she wants that garbage disposer installed. You, or an employee, is doing the work T&M. Your are, however, having a bad day — you feel a little sick, argued with your family that morning, the dog bit you on the way outta the house, truck needed a jump start, and lightning destroyed your garage just after you left. Do you still think that garbage disposer is going to take 1½ hours? It'll probably take more like two or three, so the price of that disposer using T&M just jumped to $425, even $525 or more for poor 'ol Mrs. Jones. Under Flat Rate, no matter what the extenuating circumstances, the disposer would still have been $325.

Now which pricing method is unethical? With ethics outta the way, let's add this to the equation: The price was given to Mrs. Jones prior to your beginning work so she will NOT be constantly asking you how much time is left until you're finished. She doesn't even care anymore. Is yours or your employee's stress level any less? Uh, better ethics, less stress. What's not to like? What're your thoughts about ethical Flat Rate now?

More easy steps, easy explanations to your questions will follow, but — and I'm going to be unabashedly self-serving here — if you decide you want to git started faster than these articles provide, I'm available for consultation. Call for a free 15-minute talk and I'll provide you with any number of affordable, no-hassle options to make more money with less stress on a more personal level.  Or just wait.  My whole program will eventually show up here.

Ed O’Connell is a master plumber and the founder emeritus of O'Connell Plumbing Inc. He is now a business, health and wellness coach in Fairfax, Calif. He can be reached at [email protected]

About the Author

Ed O'Connell | Business Coach

Ed O'Connell is the founder emeritus of O'Connell Plumbing Inc. He is the subcontracting business coach for smaller contractors and a Service Round Table Coach. He can be reached in Auburn, California, at home/office: 530/878-5273 or at [email protected].

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