You’ve probably experienced this yourself: a client is extremely happy with you providing them with a quote, but if you mention “fixed pricing”, suddenly the temperature in the room dropped by 20°. This is strange because effectively quoting and fixed pricing are effectively identical, but certain bad practices in the past have put customers off the idea of fixed pricing. Historically, some of the largest plumbing companies in Australia exploited flat-rate systems to force their customers to pay far more than the job was worth, so that now many people instinctively feel they are being ripped off if you present them with a flat-rate fixed-price offer. This makes it difficult for tradies, because often fixed-rate pricing is the best option both for you and the customer.
Flat-rate pricing involves calculating exactly how long you think a job will take, how much the materials will cost, and presenting the customer with a flat-rate price (effectively a quote) for their job. No matter how long the job takes, they won’t pay any more or less than what you told them upfront.
Another way of setting your prices is to use Do & Charge: you tell the client how much you charge for a callout and how much per hour (most businesses charge a set amount for the first hour and then charge in half hourly increments after that), and you bill them after the job on the basis of the amount of time this has taken. However, there are problems with this model: if the job takes 15 minutes, clients will often ask why they should pay you for a full hour. They might think they’re entitled to keep you on their premises for the full hour and get you to do other jobs. Additionally, clients can often become suspicious and start accusing you of deliberately going slow in order to tip your charges over into the next hour. This can create bad feeling between tradies and clients.
For this reason, many businesses prefer to use flat-rate pricing. If you decide to try this system, you ought to consider your location: research has shown that people in urban areas are quite accepting of flat-rate pricing, but in rural locations it’s still looked on with considerable suspicion. No matter where you are operating, if you explain properly to your client why you want to use the system, they might be more understanding. Firstly, fixed-rate pricing increases your profits, because you can leave every job when it is finished and move onto the next. Explain to the customer that better profits for you means lower prices for them. The same applies to the better cash flow fixed-rate pricing provides: everything has been agreed in advance and the client pays as soon as you finish the job, meaning you don’t have to spend time chasing up invoices. From the client’s point of view, fixed-rate pricing is advantageous because there are no unpleasant surprises when a job takes longer than anticipated, they simply pay what was agreed at the start.
The key to persuading clients to accept a fixed-rate pricing structure is to educate them about its benefits, both for you and for them. Make your rate as transparent and detailed as possible, explain what you’re going to do, how long it will take, what hourly rate you are working on, what the materials cost and so forth. The more open you can be, the more likely the client is to trust you and feel that they are going to get good value for their money. If all tradies can improve their clients’ understanding of the advantages of fixed-rate pricing, this beneficial form of payment could become much more widely accepted and the negative perception of it created by bad practices in the past could be removed. Of course, once you’ve got all the benefits of fixed-pricing, you don’t want to lose them and more, indeed maybe even lose your business, simply because you made a small error or there was an accident in a property while you were working on it. If this happens and you don’t have proper liability insurance, you could lose everything. Visit Public Liability Australia to view a range of packages of liability insurance specially designed to suit tradies’ needs and budgets.
