If you’re used to charging an hourly rate, the thought of working out of a plumbing price bookmight be a bit daunting. The good news is that keeping a few simple steps in mind, you can quickly and easily build your own price menu with flat rates that will increase profits. Here’s how:
Determine Your Break-Even Point
The first thing you need to do is determine your “break-even point.” This is the amount of money you need to bring in to pay all of your expenses. This process is basically the same whether you’re a one-person business or a large company.
First, add up all your expenses including materials, materials shrinkage, rent and utilities, etc. Now deduct from this total job costs, including equipment rental, commissions, subcontractors, and any money spend at a parts house. Do not include labor in this step.
Next, determine your cost of doing business by subtracting job costs and materials shrinkage from total annual expenses. Divide your cost of doing business by the number of billable hours in a year. (A good rule of thumb is 1,000 hours for service technicians and 1,750 hours for installations.) The resulting number is your break-even point. This is how much you need to charge per billable hour to cover expenses.
Set Your Flat Rate Price
To translate this number into flat rate prices, you just need to do a little more math. For instance, if you want a 20 percent net profit above your break-even point, you would begin by determining how many hours a given task will take. Multiply this by your break-even point. Take that number and add direct costs such as materials, rentals, subcontractors or commissions and then divide that sum by .80 and you have your price.
Doing the math yourself isn’t necessarily always so easy, and that’s where our flat rate pricing book comes in to help. Our book and tools do the math for you, streamlining the pricing process for a smooth transition to flat rates so there’s no reason not to get started making more money today.
