Flat Rate Part 5

March 20, 2003

The Final Word on Flat Rate

By: Matt Michel

Let's see. Flat rate is preferred by most customers and offered by a minority of contractors. Flat rate is fairer to the customer and the company. And flat rate is inhibited by a number of myths. What more can be said?

Flat rate protects the contractor.

Unfortunately, service providers of all stripes have a negative reputation with the public. Service companies are like Congressmen. People think their Congressman is okay, but that Congress as a whole is a bunch of bums. So while your customers may love you, they probably distrust others in your profession. Every time a scandal news show sets up a sting to scare the public, this image is reinforced.

Of course, there are a few bad apples out there and they've bent over backwards to give their industries bad names. I know of one company where the technicians openly talk about Mercedes pricing (where the technicians offer a higher price if they pull up and see a Mercedes sitting in the driveway than if they see a Hyundai).

The service industries are also hurt by the poor business practices of so-called, service professionals. To many business owners get their back up at the wrong time, get stubborn, and stand their ground where they should give a little. Each dispute contributes to the overall poor perception of service businesses.

Take the negative perceptions and add the general inability to defend themselves (because small businesses are, after all, small). Throw in an ambitious government type who wants to build a name and reputation by rooting out "wrong doing" and you've got a recipe for ruined lives and dreams. All that's needed is a match to turn on the heat and bring everything to a boil.

While some companies deserve what they get, I've seen many good, fine companies pilloried by a district attorney, attorney general's office, what have you. Sometimes the match results from the actions of a single out-of-control technician. Sometimes the match is a fired employee trying to get even. Sometimes a rabble-rousing consumer is the match. Regardless, every small business is at risk.

Flat rate helps minimize the risk…

It was the worst earthquake to hit Southern California in quite some time. With it's epicenter in Northridge, the quake made roads impassable and damaged thousands of homes and businesses. Service companies scrambled to respond to the needs of homeowners, making repairs, making homes safe.

Now, remember the environment and psyche following a natural disaster. People were traumatized. They felt a loss of control. Who can control an earthquake? They had nowhere to vent and no one to blame for their losses and inconvenience.

In the midst of this come the inevitable warnings about price gouging. Enter the contractor. If a contractor charges much more than minimum wage, someone will file a complaint.

It's possible that some unscrupulous contractors tried to take advantage of the situation. I don't know of any specific cases.

I do know of a contractor that offered a premier service and charged according. After the earthquake, he was very clear and specific with his technicians. He warned them to stick to the price book.

When he had to appear before whatever regulatory board was overseeing the complaints, he was ready. He said there were over a dozen contractors in the waiting area with him. Those he recognized all charged less than he did.

When his turn came, he presented his price book, invoices for work done after the earthquake, and invoices for identical work done before the earthquake. It was clear he was charging the same after the earthquake as he had before it. It only took five minutes and the complaints about him were thrown out. Others had less satisfactory experiences.

Natural disasters aren't the only cases. I know of another case where a contractor was being hammered by an ambitious government type who was out to make a name for himself. As the case progressed, the only legal ground available to the government type was related to a disparity in prices charged by different technicians before the contractor implemented flat rate. It was the type of disparity that occurs all the time in time and materials pricing. If the contractor had been flat rate all along, he would never have had a problem.

Consumers prefer flat rate. Flat rate is fairer. Flat rate reduces your risk.

Source: Comanche Marketing. Reprinted by permission.
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Copyright © 2002 Matt Michel

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