Thousands of contractors across this nation have been using flat rate pricing books for many years. As a matter of fact, flat rate pricing is rapidly becoming the standard within the trades industry. However, it is not becoming the standard within the industry because it's a great program-it's becoming the standard because more contractors are becoming aware of what it really costs to run a profitable service department. When the actual numbers are run, it is the rare company that can charge less than $100 per hour and still generate a reasonable profit in its service department. 
   Let's say Company A has just run its numbers to determine what it needs to charge per hour in the service department for the coming year. With all the increased costs of doing business, the company is now fully aware that, to generate a 15 percent overall net profit in service, it will require charging the customer $138/hour. Now if you are on time and materials, charging that much can be a very difficult task. What's the answer? Obviously, the company needs to switch to flat rate pricing so the customer never sees the $138/hour figure. 
   Ok, let's assume the company is now on flat rate pricing. Profits are up and complaints are down. Company A has just passed through its one year anniversary. The phone rings. It's the representative from your flat rate company. "Hello, this is John Doe from ABC Flat Rate Company. Mr. Contractor, it has been a little over a year since we printed your flat rate books for you. Your costs of doing business have gone up over the past year, are you ready to have your flat rate books reprinted?" Unfortunately, the answer is all too often no! 
   The contractor's excuses are endless. "It's only been a year since we printed the manuals." "We really can't afford to have the books reprinted." "Profits look good, perhaps next year." "I don't want to increase my pricing again; the customers won't stand for it." The list goes on and on. 
   I recently presented our brand new one-day program entitled Service Manager's University. After we discussed the pros and cons of flat rate pricing we did a class exercise in which I asked the class what costs had gone up in their company's service department over the past year. In order to keep things simple we assumed the company had three service technicians. We will also assume 50 percent of the company's gross sales were generated by installation and 50 percent by the service department. That means half of the general overhead costs will go to each department. Below are just a few of the costs that had increased over the past twelve months: 
   Can the bottom line profit in your service department afford to absorb $21,480? Most can't, although contractors across the nation continue to argue they simply can't afford to reprint their manuals. 
   Let's do some quick math. Take the $21,480 and divide it by 3,000 billed hours (each service tech bills out about 1,000 hours per year). That means when the company reprints its manuals it would need to increase its internal hourly rate by $7.16/hour ($21,480/3,000 billed hours). 
   Can you afford NOT to increase your hourly rate and have your flat rate pricing books reprinted? I don't think so. As a matter of fact, if this were my company I would increase my internal hourly rate by $10.00 per hour. That would not only cover my increased cost of $21,480 but it would increase my overall profit for the year by $ 8,520 [($10.00 - $7.16 per hour additional profit) x 3,000 billed hours a year = $8,520]. 
   One of the great benefits of being on flat rate pricing is that you no longer have to "announce" to your customer base that your pricing has increased. You simply reprint the manuals and out the door your techs go. The customer never knows you increased your hourly rate, nor do they care! 
   Now tell me again why you can't afford to have your flat rate books reprinted? It was a real eye-opener in class. Nearly the entire group of contractors in the seminar went home that day determined to have their manuals reprinted as soon as possible. 
   Contractors aren't stupid. Most will make the right business decisions when the facts are in front of them. Unfortunately, most contractors spend their days putting out fires and simply don't take the time to think through the logic of things like reprinting their flat rate manuals. The facts are now before you. What will YOU do in terms of having YOUR books reprinted? The choice is simple. Keep your current books for another year, and absorb the increased cost of doing business, or reprint your books and pass the increased cost of doing business onto your customer. My personal recommendation is to have your flat rate books reprinted a minimum of once a year and if all possible, I would suggest you reprint your books twice a year. The longer you wait to reprint your manuals the more of your increased cost of doing business will be absorbed by the company, instead of the customer. 
   Always keep one thing in mind. The fear factor of raising your hourly rate is always on the part of the company, not on the part of the customer. 
   If you are serious about wanting to run a very profitable business than you just might want to consider attending our three-day Basic Business Boot Camp. We have a boot camp scheduled in the L.A. area Feb. 21-23. Call us for details or to register. Check out the schedule below. Be sure to mention you read this in Reeves Journal to earn your $100 discount.