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Imagine going to a restaurant and seeing the menu prices described as estimated prices. When you ask the server for an explanation of the estimated cost of any item, the server informs you that prices are based on the amount of time spent by the server speaking with you to explain their offerings and take your order, how much time the chef expends preparing the meal, the time you take up space in their establishment, the server clearing the table, and you paying your bill.
Would you eat there? If you didn’t walk out of the restaurant and ordered anything, you probably wouldn’t enjoy it with the unknown finality of your upcoming bill. Then, when the final bill is 10 percent, 20 percent, 30 percent or more than the estimated price, the heartburn you feel wouldn’t be caused by the meal, but rather from the inane management protocols of the restaurant regarding their pricing procedures.
Restaurants place actual prices for the items on the menu. They don’t give you heartburn because it would be bad for business. Knowing how much you were spending before you order a meal allows you to enjoy your meal.
Restaurant owners are in the service business. The easier they make it for you to avail yourself of their services, the better they make it for themselves to achieve their goal. It requires the restaurant owner to know his real cost, price meals above that cost and deliver an excellent meal with outstanding service so you will return.
Upfront task prices
PHC service contractors also are in the service business. As a professional service provider, you should not give estimates. It makes your customer as uneasy as you would feel patronizing that hypothetical restaurant with estimated prices. You should quote actual upfront task prices for the services you offer after you have seen the circumstances surrounding the consumer’s requests or needs. Once the job is completed, stand behind those prices you quoted.
Task-estimated prices do not inspire consumers to have confidence in your abilities. Estimates indicate to the consumer that you are not sure of what you are offering to do for them. When you give estimates, you are saying the estimated price is only a maybe. The actual amount could be, and probably will be, more or less.
If it’s more, you leave yourself open to a potential argument when you present the final bill to the consumer. If it’s less, you do not maximize your ability to bring money into your business. Either way, the resulting situation is not good for you or the consumer.
Quoting an exact price for a specific task before performing the job allows you and the consumer to come to a meeting of the minds (a contract) as to the task to be done and the price for the fulfillment of performance before the customer authorizes you to proceed. Your chosen profession is PHC service contractor — not PHC service time-and-material person.
When you quote prices before work starts, skillfully perform the task and charge the consumer the quoted price, there can be no legitimate arguments regarding the price.
And if you correctly calculated your actual operational cost, applied the proportionate cost to the task blended with a profit margin allowing you to earn the reward you deserve for the excellence you have delivered, you will have the opportunity to maximize your profits.
The debate from time-and-material service persons for not giving upfront contract prices is that upfront contract pricing isn’t fair to consumers who may pay higher costs for tasks, and you can’t always see the unforeseen circumstances that could pop up. Both of these arguments are, at best, inane.
Fair is a two-way street
PHC T&M service persons who take longer than contract pricing contractors to do the same job would have higher prices if those T&M service persons correctly identified and calculated their real hourly cost and applied a proper profit margin to their task cost.
Contract pricing contractors who base their true task costs on the average cost they incur to perform any typical task will have the same price for the task while T&M contractors could charge more or less for the same task at any time.
If you installed a lavatory faucet in Mr. Jones’ master bath for whatever amount you calculated after the job was done, then Mr. Jones calls you back the next week to install the same model faucet in his main bathroom but the bill is higher or lower than the price you charged a week ago, the ingredients of a price argument are looming over your head.
Contract pricing allows contractors the opportunity to offer an upfront price that does not change for a described task so the consumer can decide whether or not to authorize contractors to perform the job.
T&M prices are in a constant state of flux. They often exceed the amount the consumer thought he would pay because the final amount wasn’t known before he gave the OK to proceed.
Contract pricing defines the parameters of any task and allows contractors to package prices in a fashion to recover their costs and earn the reward they deserve for the deliverance of excellence to the consumer and the risks they take in the delivery.
T&M pricing forces PHC T&M service persons to keep their hourly rate in line with other PHC T&M service persons who set their rates at flawed levels, often below their true costs.
Contract pricing is the definition of fair for both the consumer and the contractor, while T&M pricing is not.
The hypocrisy of T&M service
What seems hypocritical is that most PHC T&M service persons actually charge upfront contract prices for certain tasks — such as water heater, boiler and air-conditioner condenser replacements — but not for tasks such as finding a leak.
I believe if professional PHC T&M service persons think out of the box, they will be able to quote task prices before performing any task. They have to look beyond the trees so they can see the forest.
For example, Mr. Smith calls with a water leak in his ceiling below his master bathroom. By asking the proper questions, a true professional plumber could come up with a course of action that is logical and intelligent.
First, quote an actual price (not an estimate) for a passive inspection of the situation as to the possibilities that may cause the leak. Incorporate the cost for passive inspections into the minimum service call fee, which is charged to the consumer for sending a tech to address the consumer’s requests or needs. In the interest of fairness, quote minimum service call fees before dispatching techs to the consumer’s location.
Once at the consumer’s location, the tech should check the master bathroom for any visible leaks. Then he should look to see if the water closet is firmly attached to the floor with no rocking, under the lavatory for signs of leakage, and check whether the tiles, grout and caulking in the tub/shower area are in good condition.
If after this passive inspection the tech has come to the correct conclusion as to the source of the leakage, he can quote an actual price (not an estimate) to remedy the situation.
If the passive visible inspection shows no sign of leakage, some testing such as turning on faucets and testing drainage to zero in on the possible, obvious source of the leakage would be wise.
However, keep in mind that there must be breaks between each fixture test if the situation requires the process of elimination to determine whether the leak is coming from the water supply side or the drainage side. If so, each is an additional task that you should quote an actual price (not an estimate) for performing.
Sometimes, more intrusive inspections are needed, such as cutting holes in walls or ceilings. In this instance, quote an actual price (not an estimate) for each hole. Then, once you have found the cause of the leak, you can quote an exact price (not an estimate) to address the consumer’s situation.
Heating and cooling contractors also can use this process to quote actual prices (not estimates) to address consumer requests and needs.
If you think it’s too much work and the consumer will never accept it, think again. Consumers would rather have the problem fixed the first time rather than have a chronic problem that makes you look as if you don’t know what you are doing. Addressing consumer requests and needs in an intelligent, honest, upfront manner makes you look like a true professional.
You are a doctor of buildings
The motto of the plumber is, “The plumber protects the health of the nation.” To that, I add heating and cooling contractors since people would freeze in winter without heat and may not be able to breathe during the dog days of summer without air conditioning. It means PHC contractors are doctors of buildings and help medical doctors care for and protect the health of the nation.
Medical doctors are called professionals who tend to our body’s physical needs. Yet they call what they do a practice. I assume that’s because the human body is in a constant state of flux. As a PHC contractor, consumers would never accept the premise that you are practicing. They want the services you perform to address their requests and needs, and they want to be assured the job is done properly and warranted.
When you go to the doctor, he charges you for a passive inspection. Any tests are charged additionally. If the situation requires exploratory surgery, the cost to the patient increases further.
As it is with every profession or trade, there are those who are excellent, those who are good and others who are bad and should be doing something other what they are offering to the public. You may have run into a terrible medical doctor here or there whom you don’t have much faith in. If you are truly a professional PHC contractor, you don’t want to be that kind of doctor of buildings.
You want to exhibit your expertise in an excellent manner in the eyes of the consumer. Quoting actual prices (not estimates) for specific tasks honestly and confidently instills confidence in the eyes and minds of the consumer as to how they look at you. Confidence inspires trust that, in turn, creates repeat business.
If you have questions regarding this article or any business issue or you want to tell me your opinion of this article, give me a call.
But keep this in mind: Most likely you don’t patronize businesses that won’t give you an actual price for the products and services you are looking for before you decide to purchase. So understand that consumers looking for your PHC services will not want to buy your services if you charge by the hour instead of standing behind an upfront price quoted before commencing service.
Stop giving estimates. Start quoting actual task prices for all tasks. If you don’t know how, I can show you.