What is Flat Rate Pricing?

Pricing components and services for field service technicians have always been a bit of a difficult situation because they don’t know how much a job might cost until they’ve finished the work and compiled all the expenses that occurred during it.

This article will examine flat-rate pricing, a potential solution to this frequent problem, its concept, and the benefits and downfalls of using this strategy.

Flat rate pricing is the concept in which businesses charge a single price for a field service job regardless of other factors included in the process, such as delivery, material cost, extra dependencies, and so on. 

The concept of flat-rate pricing began to grow after there was a good amount of noise on the fact that local service technicians did not have a set pricing model. For any job they did, the total cost for service was calculated afterward, and it always turned out to be an exorbitant price compared to what should’ve been paid.

A problem that began to arise here was that due to overpricing of technician jobs, people stopped doing their repairs, causing massive issues impacting large groups rather than just one system or house.

A solution for this problem was brought forward in the form of flat rate pricing that would charge a one-time fee for a whole service, and the price would be mentioned to customers before the job even began.

This solved the problem of customers’ budgeting problems and allowed technicians to correctly price their services for their hours and the average cost of services and materials.

The Old Method

Before flat-rate pricing, technicians would have a pretty hard time with pricing for their jobs overall,

1. Technicians would have to calculate an estimate for every single part of the job they did.
   
   
2. This estimate for every component would vary based on the total time spent on each part of the technician job.
   
   
3. Customers would not even be able to get an average cost for a job before the job was done.
   
   
4. Due to extra factors that the technician would have to deal with, the pricing could soar way past a customer’s budget for a job, and they would have to pay that amount because there was no way of tracking these costs.
   
   
5. A lot of time would be wasted after a job just calculating the total time taken for the job and the total cost.
   
   

Pricing Book 

The pricing book is a tool that technicians can use to estimate the general pricing for every job they can do. They can use it as a reference when doing jobs in the field and needing to create an estimate for a flat-rate price.

This tool of pricing knowledge is regularly updated and used to make estimating much easier and faster, not wasting extra time on job cost calculations.

It also assures consistency to the customer and a definite rating of how much a job would cost before the technician starts it.

Components of Flat Rate Pricing

To calculate the flat rate pricing for a service job, you need to decide upon a few components of pricing that can change according to the job. This is where a price book would come in handy, and help have specific prices for every job you can do for a customer. Here are the components you need for calculating a flat rate, 

1. Hourly Rate for Technicians
2. Total Expected Time For Job (In Hours)
3. Expected Material Cost For Job Based On Description
4. Material Markup Percentage

Formula & Example

Here’s an example of how to calculate flat pricing for a technician job,

Flat Rate Price = (Hourly Rate * Expected Total Time) + Expected Material Cost + (Expected Material Cost * Markup Percentage)

Let’s say that these are the average values we have for an electrical technician job,

Hourly Rate – $150

Expected Total Time – 3 Hours

Expected Material Cost – $100
Markup Percentage – 20%

Therefore, the flat rate price for the job would be -> (150 * 3) + 100 + (100 * 0.20) = $570

Now that we’ve seen how flat rate pricing works let’s take a look at the advantages and disadvantages that it would pose for both workers and customers,

Advantages

1. Calculating a flat price rate for any job is relatively simple when you have all the information you need about the job or the rate you’re charging for that period.
   
   
2. It’s easier to keep track of one rate for multiple jobs rather than changing the pricing of your services every time you go to a new job location.
   
   
3. It provides flexibility to technicians, as they can change their prices before a job based on the job description, job complexity, or even the project’s total size, which would affect the total expenditure.
   
   
4. It is a much faster process, speeding up the total duration of each job. No need to calculate the rate for each part of the job; just communicate the cost once and focus on your work.
   
   
5. Your revenue pattern is much simpler; every job estimate can be calculated instantly and efficiently. Using this, you can estimate your earnings monthly and yearly, making it easier to decide if you need to do more jobs for the month or cool down on your frequency.
   
   
6. It is much easier for customers when they don’t have to worry about extra add-on charges and have an exact idea of the job’s final pricing.
   
   
7. Consistent prices mean that customers don’t have to look for other services and will stay with your customers as long as they are happy with the pricing for repetitive similar jobs.
   
   

Disadvantages

1. It can be challenging to set consistent pricing for all jobs because some costs may be much higher than others.
   
   
2. Consistent pricing can also mean high pricing for specific jobs, and if your rates go higher than needed, customers may try and switch to a different provider with better pricing.
   
   
3. Whether component hardware prices go up or down, flat-rate pricing forces technicians to keep their prices the same. This can even lead to a loss of sales for overpricing or revenue for underpricing.
   
   
4. A major downfall of this pricing model is going above and beyond for customer satisfaction. Sometimes, technicians might have to do extra tasks to complete a job correctly. So they might have to over-deliver in a job but cannot add additional charges at completion.