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HVAC flat rate: should you use it?

How do you decide how much to charge for your services? This is probably one of the most complicated questions that field service companies need to answer. And in case that’s not enough, now you’ve got something else to take into consideration: HVAC flat rate.

At first, prices in the field service business were based on the popular T&M method (that is, time and materials used in the job). But times have changed! Technology now enables customers to do their little research beforehand, compare prices and ask for an upfront offer even before deciding to hire you.

So this is the kind of situation where establishing an HVAC flat rate makes sense. Let’s take a look at it and learn more about this new way to charge for your services.

HVAC flat rate: should you use it?

What is HVAC flat rate?

HVAC flat rate is the use of flat rate pricing applied to HVAC, maintenance and other types of field service business. It consists basically on taking the direct cost of any of the services provided by your company and adding a markup. This increment can be a set amount or also based on a percentage. The combination of both results in your flat rate price.

In the end it’s something similar to using by the T&M method we mentioned before, only that in this case your technicians know exactly how much to charge, because the prices are already set.

 

Perks of applying flat rate to your prices

The most important advantages of adopting HVAC flat rate are simplicity and efficiency. Before that, if you used to calculate prices based on time and materials, you’d have to write up a detailed budget, taking into account every single purchase you might need for the job.

But the level of detail required for these calculations depends on the person in charge of generating the budget. Some of your technicians may forget about certain costs and end up underquotting the job. Writing accurate quotes takes time, while flat rate pricing is simple and fast.

What’s more, HVAC flat rate tends to improve customer satisfaction. If there was a mistake in the budget (due to the reasons mentioned before) and the invoice is finally higher than expected, the customer won’t be very happy about it. Flat rate also helps prevent that from happening.

Finally, the amount of time you save from not having to calculate quotes all the time also has a positive effect on accounting. The company’s billing cycle can go faster too and you can even ask customers to pay before the job even starts – or divide the invoice in two, so that you get paid as soon as possible.  

 

The negative side of flat rate

With such positive prospects, is there any disadvantage in adopting HVAC flat rate? Well, yeah. The most obvious one is that a flat rate is per se an approximate price. Sometimes you’ll be charging a little more for a job, but some others you’ll be charging a little less. The idea is that everything will balance out, but it may not do so.

Maybe your newest technicians take longer than expected to complete a job – thus working, so to say, “for free”. Or maybe the price of a certain part goes really up, and then you will need to decide whether to eat that increase or charge it to your customer – with the risk of them getting upset and not hiring you again. These are just some examples in which HVAC flat rate may not enable you to cover costs, let alone obtain some benefits.

 

It’s up to you now

So, the big question is, how do you set up your own HVAC flat rate? There are different approaches. One way to do it is calculating this fare based on your own experience in the field, although it can be difficult to know how your prices compare to other field service companies in your area. In fact, another way to do it is precisely check out the prices offered by your competitors, and base your flat rate on those.

If you want to avoid any possible headaches, another good option is using special third-party companies that help field service providers establish their prices, based on the market rates reports they generate. Simply revise the flat rate lists offered by these companies, and use them as a basis to decide your own HVAC flat rate. You can then use these prices together with your field service software, and start optimizing your invoicing and accounting procedures right away.

Want to give it a try? Download Synchroteam free demo now, just a click away!

Image by Nick Youngson

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