Systemise Your Team for Increased Profits Section8
‘Systemise Your Team For Increased Profits’ Implementation Guide
8. Plumbing Pricing Manual The Plumbing pricing manual includes 3 sections: 1. REGULAR (you have seen a sample of this already) 2. MEMBERSHIP – automatically set 10% less than regular pricing 3. DIFFICULT – automatically set 12% higher than regular pricing.
REGULAR is written at the top of every page within the book you have. The other 2 sections, Membership and Difficult, are identical to this, with their corresponding name at the top of each section and rates to match percentage variation as per above.
© 2010 Lifestyle Tradie Pty Limited
www.lifestyletradie.com.au
26
‘Systemise Your Team For Increased Profits’ Implementation Guide
a. How does the ‘Plumbing Pricing Manual’ form relate to the manual? Let’s take a look first at the formula again using an example from within the REGULAR section of the manual and relate it back to the information you need to provide above.
Formula: The first column labeled ‘1st Job’ is
1st Job Rate st
$50 1 Job rate/service call
Rate
+
$150 p/hour x estimated time
1st Job Price
Materials
+
(based on retail prices)
=
With this formula in mind, go back to the form you are required to complete. The service call is built into the 1st Job rate above. We have used $50 in the example in your sample book. See how it is incorporated above in green.
$150. $50.
The Hourly rate is built into the 1st job rate through the ‘rate’ box. This value is based on time allocated by our leading hand. We have used $150 in the example in your sample book. See how it is incorporated above in yellow.
© 2010 Lifestyle Tradie Pty Limited
www.lifestyletradie.com.au
27
‘Systemise Your Team For Increased Profits’ Implementation Guide
b. How do I know what hourly rate to set?
There are two key areas we suggest you consider when setting your hourly rate for the Plumbing pricing manual.
Firstly, you need to understand how you are placed in the market and against your competitors (to discover if you are too cheap or too expensive), and secondly what you should be charging as an absolute base to ensure you breakeven, then of course charge more to make profit.
Let me explain these one at a time:
1: How are you placed in the market and against your competitors? I suggest you take the time to complete a Competitor Analysis. Pages 95, 96 and 97 in Module1: Getting Started explains this process. We have actively completed this task annually to understand where we sat with regard to our competitors - cheap, evenly priced or expensive. If you are not comfortable making the calls, have your girlfriend, mother or other complete this activity for you.
This allowed me to confidently charge $xx to my customers, and if they ever said 'you are so expensive!', I could honestly say 'actually Mrs.Jones, you would find that I am by far not the most expensive, nor the cheapest plumber around, however I believe I charge a fair price for the quality service I deliver'. This is a great starting point for you to know where you are placed in the market with regard to price. You of course need to compare the services you offer © 2010 Lifestyle Tradie Pty Limited
www.lifestyletradie.com.au
28
‘Systemise Your Team For Increased Profits’ Implementation Guide
against your competitors. With this information in hand you can then work out your breakeven price to understand what you 'should' be charging at a minimum. 2. What is your breakeven? I suggest you arrange a meeting with your accountant to work this one out. Have a discussion over the phone first to inform them what you are trying to work out and require their assistance.
They
may
need
latest
P&L
information to be able to do this for you and understand any changes to the businesses since last you spoke.
Your break even price takes into account your expenses and hence how much money you need to bring in each month, each week to cover your costs. Once you have covered your costs you of course need then to charge more to make profit. You can set this target at whatever you want. Talk with your accountant about this to set a target that is realistic but a stretch! With your accountant you can talk about X number of trucks on the road, averaging X number of jobs a day, hence what does each truck need to make or average $x per job to assist with reaching this turnover/profit target.
This rate assists with a ‘time & materials’ environment in addition to 'upfront pricing'.
This rate (breakeven + $XX to reach $X turnover/profit for year if nothing changes) is the rate you would set your rate for the Plumbing Pricing Manual.
This is a discussion for your accountant.
© 2010 Lifestyle Tradie Pty Limited
www.lifestyletradie.com.au
29
‘Systemise Your Team For Increased Profits’ Implementation Guide
c. How do I know what service call rate to set?
There are some of you that your first reaction to this question was, ‘but I don’t charge a service call’. The name ‘service call’ can be replaced with other variations such as 1st job rate. We do charge a service call in our business. In fact it is communicated on the phone at the very first point of contact. We say ‘we will charge you a $55 diagnostic fee, then, should you go ahead with the work we do not charge this value’. This is mentioned to prevent time wasters who are expecting us to provide a quote for free. In the unlikely event that the customer does not wish to proceed with the work after diagnose is complete, we have at minimum received $55. It basically covers our running costs to attend the job.
d. Why won’t you suggest what hourly rate and service call rate to set? We can’t and won’t make any suggestions as to what hourly rate or service call rate you should charge simply because the variation on pricing state to state, country to country is too broad, and your perception and your competitive position varies from one business to another. Even the SAMPLE that is shown to you (on page 28) at $150 hourly rate and $50 service call could be considered cheap or expensive by some. For this reason the decision on pricing needs to be yours and yours alone, with the assistance of some research prior to making your final decision.
© 2010 Lifestyle Tradie Pty Limited
www.lifestyletradie.com.au
30
‘Systemise Your Team For Increased Profits’ Implementation Guide
e. How will I know if the rates I set for both the hourly rate and service call rate are correct? It is for this reason that we suggest you take the time to complete the necessary research (as suggested in Question: How do I know what hourly rate to set?) before making your final decision.
Using the Manual in ‘real life’ will help you get a feel for the implementation, how your customers are responding to the pricing and hence will give you a gauge if you are too expensive or too cheap.
Hot Tip: Upfront Pricing, although rates are set to make profit, it is not, in our opinion, your opportunity to rip off your customers and leave a bad taste in their mouth based on your over-excessive prices. As we have mentioned before, it is imperative to charge a fair price for your exceptional service and quality workmanship. In addition to this, a Membership program, where you can continue a relationship with your customer and hence build a loyalty to your business for ongoing work well into the future. The marketing term; to increase their lifetime value.
© 2010 Lifestyle Tradie Pty Limited
www.lifestyletradie.com.au
31
‘Systemise Your Team For Increased Profits’ Implementation Guide
f. How do I know what to charge for Water jetter, electric eel and CCTV?
The Water Jetter, Electric Eel and CCTV rates are set based on 30 minutes. The calculation incorporates the rate and considers maintenance costs.
How to use the Water Jetter, electric eel and CCTV pricing in the book? For Water Jetting, electric eel and CCTV work we recommend charging for the first hour of the drain clean. If the drain is not clear within this time frame and you need to go on, we suggest you stop to discuss your findings and progress with the customer and obtain further approval for 30 minute increments at a continuation rate. For example, using an extract from the REGULAR section as below. Electric eel (60mins) and Electric eel (continuation): The rates in the book are reflected at 60minutes of work, at which time we recommend you stop to discuss with the customer your progress and findings in addition to advising them of the continuation fee to use the electric eel.
© 2010 Lifestyle Tradie Pty Limited
www.lifestyletradie.com.au
32
‘Systemise Your Team For Increased Profits’ Implementation Guide
Don’t forget, you always have the opportunity to ‘Add On’ additional charges to clean up the sewer spillage for a blocked drain. As below the ‘Add On’ charge would an additional $65 for the invoice.
For example, using an extract from the REGULAR section as above, if you were called to a house to use the electric eel and whilst you were there, you found you could charge to clean up the sewer spillage, you would quote the customer
Electric eel at Regular rate (60min) $200.00
Clean sewer + spillage Add on rate $65.00
=
Total Job Price $265.00
Remember to make note of the blue listings Using the example below – Electric Eel – you will see the blue text that reads ‘Rootx, Camera, Excavate’.
This blue text are to remind the tradesman of additional solutions for the problem they are faced - additional up-sell or cross-sell opportunities that they could be making with regard to the job they are performing. For example: after diagnoses of the necessity to use the electric eel to unblock the drain, there is an opportunity to educate and recommend a treatment of Rootx to assist to clear the drain.
© 2010 Lifestyle Tradie Pty Limited
www.lifestyletradie.com.au
33
8. Plumbing Pricing Manual The Plumbing pricing manual includes 3 sections: 1. REGULAR (you have seen a sample of this already) 2. MEMBERSHIP – automatically set 10% less than regular pricing 3. DIFFICULT – automatically set 12% higher than regular pricing.
REGULAR is written at the top of every page within the book you have. The other 2 sections, Membership and Difficult, are identical to this, with their corresponding name at the top of each section and rates to match percentage variation as per above.
© 2010 Lifestyle Tradie Pty Limited
www.lifestyletradie.com.au
26
‘Systemise Your Team For Increased Profits’ Implementation Guide
a. How does the ‘Plumbing Pricing Manual’ form relate to the manual? Let’s take a look first at the formula again using an example from within the REGULAR section of the manual and relate it back to the information you need to provide above.
Formula: The first column labeled ‘1st Job’ is
1st Job Rate st
$50 1 Job rate/service call
Rate
+
$150 p/hour x estimated time
1st Job Price
Materials
+
(based on retail prices)
=
With this formula in mind, go back to the form you are required to complete. The service call is built into the 1st Job rate above. We have used $50 in the example in your sample book. See how it is incorporated above in green.
$150. $50.
The Hourly rate is built into the 1st job rate through the ‘rate’ box. This value is based on time allocated by our leading hand. We have used $150 in the example in your sample book. See how it is incorporated above in yellow.
© 2010 Lifestyle Tradie Pty Limited
www.lifestyletradie.com.au
27
‘Systemise Your Team For Increased Profits’ Implementation Guide
b. How do I know what hourly rate to set?
There are two key areas we suggest you consider when setting your hourly rate for the Plumbing pricing manual.
Firstly, you need to understand how you are placed in the market and against your competitors (to discover if you are too cheap or too expensive), and secondly what you should be charging as an absolute base to ensure you breakeven, then of course charge more to make profit.
Let me explain these one at a time:
1: How are you placed in the market and against your competitors? I suggest you take the time to complete a Competitor Analysis. Pages 95, 96 and 97 in Module1: Getting Started explains this process. We have actively completed this task annually to understand where we sat with regard to our competitors - cheap, evenly priced or expensive. If you are not comfortable making the calls, have your girlfriend, mother or other complete this activity for you.
This allowed me to confidently charge $xx to my customers, and if they ever said 'you are so expensive!', I could honestly say 'actually Mrs.Jones, you would find that I am by far not the most expensive, nor the cheapest plumber around, however I believe I charge a fair price for the quality service I deliver'. This is a great starting point for you to know where you are placed in the market with regard to price. You of course need to compare the services you offer © 2010 Lifestyle Tradie Pty Limited
www.lifestyletradie.com.au
28
‘Systemise Your Team For Increased Profits’ Implementation Guide
against your competitors. With this information in hand you can then work out your breakeven price to understand what you 'should' be charging at a minimum. 2. What is your breakeven? I suggest you arrange a meeting with your accountant to work this one out. Have a discussion over the phone first to inform them what you are trying to work out and require their assistance.
They
may
need
latest
P&L
information to be able to do this for you and understand any changes to the businesses since last you spoke.
Your break even price takes into account your expenses and hence how much money you need to bring in each month, each week to cover your costs. Once you have covered your costs you of course need then to charge more to make profit. You can set this target at whatever you want. Talk with your accountant about this to set a target that is realistic but a stretch! With your accountant you can talk about X number of trucks on the road, averaging X number of jobs a day, hence what does each truck need to make or average $x per job to assist with reaching this turnover/profit target.
This rate assists with a ‘time & materials’ environment in addition to 'upfront pricing'.
This rate (breakeven + $XX to reach $X turnover/profit for year if nothing changes) is the rate you would set your rate for the Plumbing Pricing Manual.
This is a discussion for your accountant.
© 2010 Lifestyle Tradie Pty Limited
www.lifestyletradie.com.au
29
‘Systemise Your Team For Increased Profits’ Implementation Guide
c. How do I know what service call rate to set?
There are some of you that your first reaction to this question was, ‘but I don’t charge a service call’. The name ‘service call’ can be replaced with other variations such as 1st job rate. We do charge a service call in our business. In fact it is communicated on the phone at the very first point of contact. We say ‘we will charge you a $55 diagnostic fee, then, should you go ahead with the work we do not charge this value’. This is mentioned to prevent time wasters who are expecting us to provide a quote for free. In the unlikely event that the customer does not wish to proceed with the work after diagnose is complete, we have at minimum received $55. It basically covers our running costs to attend the job.
d. Why won’t you suggest what hourly rate and service call rate to set? We can’t and won’t make any suggestions as to what hourly rate or service call rate you should charge simply because the variation on pricing state to state, country to country is too broad, and your perception and your competitive position varies from one business to another. Even the SAMPLE that is shown to you (on page 28) at $150 hourly rate and $50 service call could be considered cheap or expensive by some. For this reason the decision on pricing needs to be yours and yours alone, with the assistance of some research prior to making your final decision.
© 2010 Lifestyle Tradie Pty Limited
www.lifestyletradie.com.au
30
‘Systemise Your Team For Increased Profits’ Implementation Guide
e. How will I know if the rates I set for both the hourly rate and service call rate are correct? It is for this reason that we suggest you take the time to complete the necessary research (as suggested in Question: How do I know what hourly rate to set?) before making your final decision.
Using the Manual in ‘real life’ will help you get a feel for the implementation, how your customers are responding to the pricing and hence will give you a gauge if you are too expensive or too cheap.
Hot Tip: Upfront Pricing, although rates are set to make profit, it is not, in our opinion, your opportunity to rip off your customers and leave a bad taste in their mouth based on your over-excessive prices. As we have mentioned before, it is imperative to charge a fair price for your exceptional service and quality workmanship. In addition to this, a Membership program, where you can continue a relationship with your customer and hence build a loyalty to your business for ongoing work well into the future. The marketing term; to increase their lifetime value.
© 2010 Lifestyle Tradie Pty Limited
www.lifestyletradie.com.au
31
‘Systemise Your Team For Increased Profits’ Implementation Guide
f. How do I know what to charge for Water jetter, electric eel and CCTV?
The Water Jetter, Electric Eel and CCTV rates are set based on 30 minutes. The calculation incorporates the rate and considers maintenance costs.
How to use the Water Jetter, electric eel and CCTV pricing in the book? For Water Jetting, electric eel and CCTV work we recommend charging for the first hour of the drain clean. If the drain is not clear within this time frame and you need to go on, we suggest you stop to discuss your findings and progress with the customer and obtain further approval for 30 minute increments at a continuation rate. For example, using an extract from the REGULAR section as below. Electric eel (60mins) and Electric eel (continuation): The rates in the book are reflected at 60minutes of work, at which time we recommend you stop to discuss with the customer your progress and findings in addition to advising them of the continuation fee to use the electric eel.
© 2010 Lifestyle Tradie Pty Limited
www.lifestyletradie.com.au
32
‘Systemise Your Team For Increased Profits’ Implementation Guide
Don’t forget, you always have the opportunity to ‘Add On’ additional charges to clean up the sewer spillage for a blocked drain. As below the ‘Add On’ charge would an additional $65 for the invoice.
For example, using an extract from the REGULAR section as above, if you were called to a house to use the electric eel and whilst you were there, you found you could charge to clean up the sewer spillage, you would quote the customer
Electric eel at Regular rate (60min) $200.00
Clean sewer + spillage Add on rate $65.00
=
Total Job Price $265.00
Remember to make note of the blue listings Using the example below – Electric Eel – you will see the blue text that reads ‘Rootx, Camera, Excavate’.
This blue text are to remind the tradesman of additional solutions for the problem they are faced - additional up-sell or cross-sell opportunities that they could be making with regard to the job they are performing. For example: after diagnoses of the necessity to use the electric eel to unblock the drain, there is an opportunity to educate and recommend a treatment of Rootx to assist to clear the drain.
© 2010 Lifestyle Tradie Pty Limited
www.lifestyletradie.com.au
33
