The Cost of a “Free Estimate” and “Flat Rate Pricing”

sbess

One of the questions we often receive is: “Do you give free estimates?”

As a consumer it makes sense that you would want to know your involved costs before launching into a project you may not have in your budget. Contractors dragging out a project in order to extract as much money as possible is another concern for customers.  These are all very real and legitimate worries.

 

This leads to the method that has become an industry standard: the “free estimate.”  Unfortunately for contractors, there is no such thing as a free estimate; every estimate costs the contractor travel expenses and labor to create. This “free estimate” cost has to be factored into pricing. On larger projects, such as a new home or office building, that cost is a smaller percentage of the job than on a project such as new kitchen lighting.  Prices are adjusted for contractors and consumers accordingly; think of it as wholesale pricing.

 

In the service industry this has led to the creation of “flat rate” pricing.  This is an adaptation from the automobile industry in which each repair has a “book” number of hours it should take. This book rate is fairly easy as every Ford model A made in 1918 is the same. Changing a starter in one customer’s vehicle will take the same amount of time as another’s assuming make, model, year and options are equal. However, every electrical system in a building is unique. Even two homes that are the same model in the same subdivision finished the same year will most likely not be wired exactly the same.  Over time, additions and repairs may have compromised the integrity of the original system leading to hidden flaws. It doesn’t actually make sense to fit unique repairs into a uniform pricing structure like the “flat rate” pricing system, but it’s often presented as possible.

 

Flat rate pricing involves creating a book filled with “assemblies;” an example would be installing a new outlet within 20 feet of an existing outlet. In this system, each electrical technician is given the book explaining set charges. The problem is: no two jobs are the same. The contractor has to build each assembly based on worst case scenarios. He usually loses money on the worst case scenarios and makes it up on the rest. Basically, the customer with an easy job pays for the customer with a hard job.

 

Additionally, the contractor operating on “flat rates” knows he isn’t going to get every job he provides a “free estimate” on, so, prices reflect the percentage of work he thinks he will actually do, which means the cost of all of those “free estimates” include that cost being passed on to customers. If this seems like a no-win situation, that’s because it is a no-win situation for customers with a relatively easy job and contractors that value their customers’ time and money.

 

We know this because we have experience in the “free estimate/flat rate pricing” service model. We have owned a large national service franchise, and experienced the frustration with this system. It was frustrating for our customers because we had to charge so much to make a profit, and it was frustrating for us because electricians want to do electrical work, not give out “free estimates” all day. Our electricians had a hard time buying into the pricing because it was exorbitant to cover the cost of those “free estimates” and those uniquely challenging jobs.

 

So we had to ask ourselves: “What is the answer?” We realized we would still have to give “free estimates” but we have chosen to do so only on larger projects where the cost as a percentage of the job is smaller. We’ve chosen to do this on projects that will take us more than two days. Who makes that decision? You, the customer.  If you think the work will take more than two days, we will come look at it for “free”.  What if you’re wrong?  If, based on the information you provide us, we don’t think it will take longer than two days, we will inform you of time and cost involved. This allows us to start working for you when we show up, saving you time and money. If, when we look at it we realize it is a larger job, the estimate is of course, free.

 

For smaller jobs the answer is to charge each customer for the work they want done, not passing along the cost of every “free estimate” that has to be given to get that job. How do we do that? We charge an initial hourly rate that covers our expenses to send a licensed electrician in a company-owned vehicle to your property. Once the electrician arrives they will go over the work requested, and provide you with an estimate, if requested. This is usually accomplished quickly in the first hour. You have paid for the estimate, but we know what we are going to have to do to get the job done. We start working at the agreed upon rate, complete the job, receive payment and your electrical issue is fixed. If it’s a straightforward issue, we usually fix it in the initial hourly rate.  It’s pretty simple: no more waiting to meet contractors for your “free estimates”. No more scheduling the contractor to do the work after you have “collected bids” and made a decision.

 

Call us and we will respect your time. We will only charge you for the work requested. You will have your issue fixed in the least amount of time and cost. We look forward to providing you with this “Quality Service”.

 

Darin Bess

Owner and Operations Manager

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