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  1. #1
    Join Date
    Jan 2007
    Location
    cypress, tx.
    Posts
    104

    flat rate or t&m?

    I'm getting close to retirement and am starting a company on the side so I don't have to watch soaps all day. Thinking about the light commercial market - rtu's and such. Don't know much about the business end, but I've read alot about flat rate pricing and on the surface, it seems like the ticket for a guy like me. Can you guys give me some pros and cons?

    Thanks

  2. #2
    Join Date
    Jun 2006
    Location
    Midwest
    Posts
    284
    I think flat rate pricing is typically used in residential service because of the nature of the work and the benefit to the customer by knowing what the repair will cost upfront. A residential company with sharp techs can capitalize with flat rate pricing because the unit can be diagnosed within an hour on a majority of the calls.
    On the commercial side I think it would be a bad thing because it is impossible to get 8 jobs done in one day and there are a lot of unknowns. I say this because with flat rate pricing, You have a diagnostic fee which is at a set amount.(Lets say $60 which would allow you 1 hour) This is for the time it takes to diagnose problem only. Doesn't matter if it takes you 10 minutes or 8 hrs to find problem, Customer pays $60. It can take a long time just to access the equipment when doing commercial work. $60 for several hours it can take to gain access and diagnose unit won't cut it. A common practice in commercial service is to charge by the hour to diagnose, Then give a quote to make the repairs which will include parts/labor to do job.
    It's All Good!!!

  3. #3
    Join Date
    Aug 2003
    Location
    Western, NY
    Posts
    817
    I agree with what jimbob73 said. Hourly rate is the way to go in commercial, IMHO.

  4. #4
    Join Date
    Mar 2004
    Location
    CHICAGO SUBURBS
    Posts
    464
    T&m is the only way to go in comm. Too many unknowns to flat rate. Do ladders need to be set up or is there ladders mounted to buildings? How far away from unit is 120v power outlet? How far away is water supply for coil cleaning etc.? I've had simple maintenances take a long time, do to no close water supply and had to rinse coil cleaner with a water fire extinguisher and make numerous trips to a sink to refill it.
    Some people swear by me and some at me

  5. #5
    Join Date
    Jan 2007
    Location
    cypress, tx.
    Posts
    104
    thanks for the input - I hear what you are saying about the possible complications, but the system I was looking at allows for a service charge that seems reasonable to me to cover diagnosis, and allows you to customize for problems such as accessabilty. The thing that I find attractive about the whole thing is that they claim to cover all of the incidentals that a guy like me is likely to miss. It's been a long time since I did side work, but I always felt like even though I enjoyed the extra cash in my pocket , I was losing money if I considered all of the expenses. I've got 23 techs working for me and about half of them do side work. After talking to them, I'm convinced only one of them is really making a decent profit. I would like to save myself the time he puts in bidding each job, which is what got me started on this flat rate thing in the first. I'd also like to feel certain I wasn't screwing myself or the customer.

    Still thiking about.

  6. #6
    Join Date
    Dec 2001
    Location
    Southern Tier, NY
    Posts
    6,066
    HALF ...??

    HALF ... do SIDE WORK ....??

    you feel this is acceptable ..??

  7. #7
    Join Date
    Jan 2007
    Location
    cypress, tx.
    Posts
    104
    We work for a school district. They arn't competing with us, and they do their jobs while the're here. It doesnt bother me that they choose to make money on their own time, and even if it did, I doubt I could stop them, short of firing them.

  8. #8
    Join Date
    Dec 2001
    Location
    Southern Tier, NY
    Posts
    6,066
    Quote Originally Posted by FacilityPro View Post
    about half of them do side work. After talking to them, I'm convinced only one of them is really making a decent profit.
    and ....

    ALL of them ... are stealing work from Legitimate contractors

  9. #9
    Join Date
    Jan 2007
    Location
    cypress, tx.
    Posts
    104
    most of them, myself included, are licensed and insured. We have the same overhead as any of the "legitimate " contractors you refer to,which is the basis of my original question concerning flat rate pricing. There are a few hacks in the crowd, but to assume we all are would be incorrect.

  10. #10
    Join Date
    Sep 2005
    Location
    Texas
    Posts
    2,793

    licensed or not...

    ...it is illegal in the state of Texas to use your license for a part-time business. The law states that a license can only be used to solicit work when a license holder is a FULL TIME employee of the company that he assigned his license to. Part timers may it hard on legitimate full time business owners

  11. #11
    Join Date
    Jan 2007
    Location
    cypress, tx.
    Posts
    104
    I'm not sure I agree with that interpretation of the law, but I'll contact TDLR to get the skinny on that. I believe the intent of that is to prevent license holders from allowing thier liscense to be used by a company who pays them only for that purpose. If I own and operate a company, for which I handle all of the funtions performed by that company, and bear all of the liability that comes with it, and am involved with 100% of all business conducted by that company, this makes me a full time employee of that company. If I adhere to all of the laws and regulations which apply in the state of Texas for an HVAC contractor, which I do, what makes me any less legitimate than any other contractor? ( can't get to my books right now to look this up - the're at the office, but I'm pretty sure I'm correct) . I know this is a sore subject for any contractor who is paying all the costs associated with operating a legal business - because I pay all those same costs. I agree that the hacks who operate without these costs hurt the industry - I just don't happen to be one, simply because I have another job.

  12. #12
    Join Date
    Sep 2005
    Location
    Texas
    Posts
    2,793

    sorry if I sounded accusitory

    I wasn't calling you a hacker. Here is what the law says;

    Subchapter F. License Requirements
    Section 1302.252(a)

    An air conditioning and refrigeration contracting company must employ full-time in each permanent office a license holder who holds an appropriate license assigned to that company.

  13. #13
    Join Date
    Jan 2007
    Location
    cypress, tx.
    Posts
    104
    Which I do. My license is assigned to my company, which is a full time HVAC contracting company, and which I devote 40 hrs. a week to, at the minimum. I don't use this license for any other enterprise, including the school district I work for. I did call TDLR for clarification on this when I decided to start this enterprise, but was unable to reach anyone who could answer my questions. I may try emal - I'm a law and order kind of guy. Wouldn't be doing this if I thought it was illegal, but I've been wrong before (imagine that).
    Anyway, I appreciate the feedback. Any thoughts on the flat rate issue?

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