Jim Huston Certified Professional Landscape Estimator, J.R. Huston Enterprises, Inc.

Flat Rate Pricing

Used prevalently in the plumbing and auto repair industries, flat rate pricing is basically a form of pricing that attempts to simplify the pricing process by charging an all-inclusive flat rate for a particular product or service. The flat rate includes labor, materials, and any equipment needed to perform the task. Essentially, you’re providing the client with a “grocery” list of sorts from which to choose services and products.

Last fall, I had my furnace repaired. The technician arrived and identified the problem. He then pulled out a list that contained virtually all the potential repair services and products he might have to perform in the field. It took him no time at all to calculate a price for the needed work. Because the bill exceeded a minimum hurdle amount, the trip charge was waived. Otherwise, I’d have had to pay a $65 show-up fee.

The auto repair industry does something very similar. Once the problem is diagnosed, a service representative pulls out a list of services and products and quotes a fee for the respective item. What you don’t see is a comprehensive manual produced by each automobile manufacturer, listing all repairs and services by model year. This manual contains standards or benchmark labor hours and the materials required to perform the task in question. Service providers then attach their labor rates and material prices to these standards in order to calculate the price for each task or service.

Calculating Flat Rates

This is a rather simple process. Basically, they’re unit prices with which you are probably familar. However, two items tend to complicate it. The first is the need to have a “trip” charge or show-up fee, where the non-site time for the day is covered and paid for by the client. Under normal circumstances, a typical service requires a minimum of a half-hour of non-site time, to load/unload the truck and drive to the client’s site.

The second item that complicates the flat rate pricing process is labor-only work. Irrigation service technicians often have to troubleshoot problems, adjust heads and/or track valves. In this case, in order to cover labor-only costs, a predetermined labor rate is required.

Flat Rate for Irrigation Spray Heads

In this case, we’ll calculate a scenario for a half-day of installing spray heads. Our service technician is working a 10-hour day and a 50-hour week. The crew used a production rate of four heads per hour. This may be conservative, but I’d rather understate than overstate our production rate. Average wage, risk factor, labor burden, and ancillary materials (the funny pipe and elbow) are also included, as well as warranty call-back time and materials.

Our price per head calculates to be almost $39. Again, I’d round this up to $40 or higher, if at all possible.

However, we have a problem. What if you only need to replace one head and it takes you an hour to get to and from the site? Or what if you get to the site and the head is only clogged. You have no materials to charge to the customer.

This is where I think you need to include a trip charge and an hourly rate. You can always waive the trip fee if, like the plumber, the bill exceeds a predetermined “hurdle” amount.

Calculating flat rates for the automobile repair and plumbing industries is much simpler than for the Green Industry. The variables within an auto repair shop or for a plumber are far fewer than those for an irrigation service technician, arborist, or landscaper. They don’t have to dig through 12 inches of mud and muck to get to the problem. Nor do they have to work in the freezing rain.

While determining flat rates for the Green Industry is more difficult, it can be done. However, you must think through the possible scenarios as thoroughly as possible and account for labor-only situations. To do so, a “trip charge” is often used. A published rate card can also help, even if it’s only used for internal company purposes.

If you perform these types of services, you might want to evaluate and explore the possibility of providing your customers with flat rate pricing. Use the methods outlined here but be sure to cover any contingency that you might face.

Jim Huston is president of J.R. Huston Enterprises, Inc. and has helped numerous contractors achieve sustained profitability through proven business practices. To learn more about planning a successful season, pick up a copy of his book, “How to Price Landscape and Irrigation Projects” or his new interactive CD, “Strategic Planning for Landscape and Irrigation Contractors.”