Episode 7 - How to Sell Flat Rate When Clients Want Hourly
Among the many challenges electricians face is shifting from hourly to flat rate pricing. Many customers often prefer an hourly rate since they believe this saves them money, which can be a problem if you're planning to make the switch. If you cannot develop a good plan that helps customers understand why flat rate pricing is better, they'll be hesitant to move away from the hourly rate. This leads to potential project loss, conflict with customers, and frustration on both ends.
So how do you deal with clients that don't prefer flat-rate pricing? How do you make this transition, and what do you do when they want to know your hourly rate?
There are several ways to deal with this situation. First, understand the reason for them asking so you can adequately come up with an answer that best suits the customer. Then, try to shift the focus, get to know your client, and reach a first-name basis level, so it subconsciously makes them feel comfortable with you.
When that's done, ask for their address since you need to know if they’re within your area before giving them a rate. Lastly, request their contact number to quickly get in touch again.
Once they supply these details, they’ll be more likely to want to continue working with you since they won’t have to go through the tedious process of finding another electrician.
If a customer resists the flat rate pricing model, it is essential to explain the benefits of this approach and how it can better serve their interests. For example, you can say that while hourly pricing may seem to benefit you by providing more significant compensation for longer jobs, it ultimately leads to unpredictability and makes it difficult for the customer to prepare financially.
By contrast, flat rate pricing provides a precise and predictable customer cost, enabling greater financial planning and transparency. Furthermore, this pricing model enables you to accurately predict project timelines, resulting in more efficient work and cost savings for the client.
Finally, when discussing the switch to a flat rate pricing model, it can be helpful to emphasize that this change is being made with the customer's best interests in mind and is meant to provide greater value and transparency in the services offered.
By following these given solutions, you can successfully transition to a flat-rate pricing model without negatively impacting your business or customer relationships. You'll see more accurate budgeting, greater cost savings for clients, and improved customer satisfaction.
@4:06 - Clay Neumeyer (serviceloopelectrical.com)
This is Electropreneurs Success Radio, and we're on a mission to help you master sales, simplify pricing, and deliver consistent premium level service.
Hi, Dustin and Trina. Welcome to the show. If you guys hear us engaging with our live viewers, that's actually back at our Facebook page and all the links are on the podcast pages as well.
So today, what are we going through, Joseph?
@4:46 - Joseph Lucanie
We're going to go through, it was actually a very fun situation. Someone brought up on RSS. They were saying, well, what do we do when our clients tell us that they don't want to go flat rate?
You know, we used to work with hourly. What do we do now? How do we make that transition? Or even what do they say?
Will they even want us to go from hourly to flat rate?
@5:07 - Clay Neumeyer (serviceloopelectrical.com)
Yeah, and I love this topic. As you guys know, listening or viewing us live right now, we're helping people simplify pricing and in a large way, given that context, moving from hourly to a flat rate, you're able to come up with these six options that we recommend really in mere minutes once it's rehearsed a few times is a superpower.
Correct. So powerful. Definitely. So the context of this one, of course, this is one of our clients shifting from that hourly rate to the flat rate.
And he's just at this point, he's gone through exercise of figuring out that burden and sold rates, figuring out his markups and that sweet spot he wants to be in.
And now he's about to present, getting ready to present, and thinking, hey, I've still got this piece that I need to overcome.
@5:56 - Joseph Lucanie
What if they tell me they want to know my hourly rate? And that's where the call took off today.
So the thing that we wanted to dive into on that was we have to understand the why the question is being asked in order to properly come up with a reasonable answer, right?
So the call comes down to where they, I think the customer, had actually called in and said, hey, what do you charge for an hourly?
Like I want three recess lights put in my kitchen. What's your hourly rate? Then why do you think like, coming from the mindset of the typical electrician, when you hear someone ask you that over the phone, Clay, what does that make you think?
@6:35 - Clay Neumeyer (serviceloopelectrical.com)
Makes me think they want to know how cheap I can serve them.
@6:38 - Joseph Lucanie
Mm-hmm. And as a premium service provider, is it any of our interests at all of being cheap or serving people at a cheap well?
@6:45 - Clay Neumeyer (serviceloopelectrical.com)
Not at all. Feels like something we need to pivot out of somehow.
@6:50 - Joseph Lucanie
Correct. We gotta be doing the exact opposite. So the only way that we can do that is first shifting the focus to three things.
So they'll come and say, so I'm trying to get these lights. installed in my kitchen, how much do you charge?
What your hourly rate? First would be, well, I'd be happy to help you with that. Before we get started, who do I have the pleasure of talking to?
Do you feel like getting the person's name and being on a first name basis may help overcome the objection or even be in a place of being able to talk about an objection?
Definitely. Yeah, so we first is, all right, let's get the name, let's make sure we're on a first name basis.
Secondly, is then turning down and saying, all right, so where's the customer you've been looking at? Do you mind if I have your address?
Because how do I even know I can serve your area? I know there were multiple times whenever I would answer the phones that someone would call and they're in a completely different state.
And now I'm trying to give an hourly rate to a customer I can't even serve. You feel like knowing where they might be at is helpful?
Yeah, definitely. And then lastly is asking them and saying, all right, so just so I'm on the same page to avoid anything happening in case we ever get.
if it's connected, is this the best number to reach you? Just to confirm, is it at 867-5309? It's like, yes, it is.
Great. So we've got three pieces of information. They gave us their name, their number, and their address. At this point, if a customer is actually interested in working with you, they are drastically more likely to actually move forward with an appointment because they've already given you three bits of personal information.
Like, you've pretty much given away the keys to the castle at that point.
@8:30 - Clay Neumeyer (serviceloopelectrical.com)
They know where you live, they know how to reach you, they know your name. Even though it's just little minuscule steps, little inching forward, we're getting some momentum even at this point.
@8:40 - Joseph Lucanie
Yeah, so let's take this in a complete vacuum, right? So you've got one customer, one contractor when they get asked that question, they say, yeah, we're about $105 an hour.
Okay, thanks, click. Did that person serve that customer in any way?
@8:58 - Clay Neumeyer (serviceloopelectrical.com)
None at all, it gave them an average. in a marketplace, which may or may not be even an average or a proper representation.
@9:06 - Joseph Lucanie
Correct. And in addition to it, if they were going to go buy an hourly rate, how does the customer know that you're going to work at the same speed or quality or process as another electrician?
@9:19 - Clay Neumeyer (serviceloopelectrical.com)
That's the missing information, I would say. The misjudgment, really.
@9:23 - Joseph Lucanie
So even if you were $300 an hour and your competitor is $100 an hour, are you able to do something that's at least three times the quality?
Are you able, do you really feel like you're going to do something that's going to be better, more reliable, safer, better customer service, better warranty?
I would hope so to justify it, right?
@9:41 - Clay Neumeyer (serviceloopelectrical.com)
Yeah.
@9:42 - Joseph Lucanie
Awesome. So that's the first step there. Now, the next thing came down to, what did they end up going into?
I believe they mentioned something like, what do I do when the customer gives you some resistance to it, right?
@9:55 - Clay Neumeyer (serviceloopelectrical.com)
Was that a question that came up?
@9:57 - Joseph Lucanie
Yep. Correct. So if they come by and they say, well, Well, what if my existing customers don't want to go flat rate?
The reason is we have to explain how it benefits them to do so. So if I was going to go hourly and the project took longer, do you think the customer would be comfortable with me charging them more for it?
@10:16 - Clay Neumeyer (serviceloopelectrical.com)
No.
@10:18 - Joseph Lucanie
Would they want some sort of assurance to know that if they were going to budget for something, that they could accurately have a budget they could stand behind?
@10:26 - Clay Neumeyer (serviceloopelectrical.com)
I would, I would assume so. Yes, I would, as a customer, that's what I would want.
@10:30 - Joseph Lucanie
So that's the position that we have to present it to, to the customer and say, believe it or not, hourly actually works in my best interest.
And if you want to stay hourly, I'd have no problem with that. But the reason why we're shifting to flat rate is because we believe in giving back to every one of our clients.
We've done the market research and have realized that if we can offer you a flat rate, we can keep our costs in a measurable way so we can save you the most that we were not consistently nickel and dashing.
timing you if anything were ever to go up. In addition, it allows us to accurately predict projects so we can offer you better options in a way that once again, saves you time, hassle and money.
And then lastly, one of the main benefits of doing this is if you're gonna go flat rate, I have the ability of really dialing into the quality and the reliability factors of this.
Meaning that I can really design a full range of options and I can stand behind the number for a longer period of time.
So was I wrong to wanna offer these benefits to you and your family? Not at all. Was I wrong to feel like this would be something that you could find valuable?
@11:38 - Clay Neumeyer (serviceloopelectrical.com)
Not at all.
@11:40 - Joseph Lucanie
Or was I wrong to think of ways to try to avoid you wasting money? No, sir. There you go.
Well, actually if I ended it in a sir, that's usually a problem.
@11:50 - Clay Neumeyer (serviceloopelectrical.com)
It means that I didn't bond with them enough, right? Well, it's a no sir from me, but it's a more accurate situation, really.
Overall, the whole. The whole thing is more defined. And earlier in the call, we did tie this back into another thing that we help with really is is your strategic positioning in your business.
And that's another chunk of leverage. See, if we charged hourly, we wouldn't be able to have this same level of guarantee on our service.
Because we're able to do this in a flat rate, very controlled environment, a controlled exchange, then I can also guarantee that nothing will ever change without first communicating it with you and getting your approval.
Mm-hmm. Wow. Now that finish line is nice to know where it is, isn't it?
@12:40 - Joseph Lucanie
Especially. Especially when you have the customer coming to you and saying, well, why do I even need to ask the flat rate?
Like, why do I even need to ask that hourly rate? The main thing is, is, would you believe me if I said that some customers have just been mentally conditioned to purchase in this way, whether they realize it's right or not?
@12:59 - Clay Neumeyer (serviceloopelectrical.com)
100%, the same way people are.
@13:00 - Joseph Lucanie
in addition to sales resistance. Exactly. So we as the electricians have a definite advantage but we don't ever seem to use it.
Now I'm not saying an advantage over a customer, something you can do to them and something we should do for them.
If you, the electrician go on, let's say two service calls a day, you've seen five days a week, 10 different homes, right?
With electrical arranging situations. Over the course of all the years we've done it, how many homes, how many systems, how many faults, how many solutions?
Whereas the customer, how many panels have they changed at this house? Maybe one if they've been there for a long term, maybe.
How many times have they ever had to call an electrician? And if not, if they've only done it every now and then how much trade experience do they have?
How do they know what the right way of purchasing something is? They'd only know what they've been taught and the trades.
We. we as an industry have taught them that they need to go hourly. So if anything, what we need to do is we can't blame the customer from trying to solve a problem in the way they've been educated to do so.
What we are responsible to do is to say that this way is better. And the way it's better is by describing how it benefits the client.
When you lead with those things, you'll often find you're more successful.
@14:26 - Clay Neumeyer (serviceloopelectrical.com)
That's right. What's the value stack? I mean, the hourly is a problem. We kind of skipped over that today, but assuming you're watching this right now and you're not hourly already, well, let's say there are a couple of you that are.
Maybe you were listening to this and you're still in the hourly challenge, replay or live. There's no offense to be taken here, but doesn't the hourly present a problem when you yourself can't show up?
Maybe the first question I should ask, are you the most efficient? Are you the quickest worker? Are you the best worker in your enterprise, in your organization?
What about when Johnny shows up? What about when Johnny shows up late or hungover because it's Super Bowl Monday?
Mm. Right? Is that same level of service coming across now? Is it the same price as what the neighbor paid for you to do the same job two weeks ago?
@15:16 - Joseph Lucanie
Ooh.
@15:17 - Clay Neumeyer (serviceloopelectrical.com)
There lies the problem, right?
@15:21 - Joseph Lucanie
Mm-hmm.
@15:22 - Clay Neumeyer (serviceloopelectrical.com)
So when you can't lock that price up front, well, this is an estimate. Well, why did Susie pay 1900 and I'm paying 27?
And it seems like, honestly, the quality is crap here. It's different. It's not the same. I keep circling this thing back, and sorry if I take us too far out.
@15:38 - Joseph Lucanie
You know where I live. I'm a space cadet over here.
@15:42 - Clay Neumeyer (serviceloopelectrical.com)
Mm-hmm. Major Tom. Head to ground control.
@15:47 - Joseph Lucanie
No, I love it though. I was gonna say because no matter how far you go into it, the funnel just keeps spiraling and spiraling and spiraling.
At the end of the day, the customer is not educated as to why going. flat rate benefits them. We can always ask questions that ask the opposite such as, was I wrong to try in blank?
So can I give you an example of what that might sound like? Please go ahead. So the customer comes to you and says, why aren't you flat rate?
Or why aren't you hourly? Why can't I get a material in labor breakdown? Tell me what it's gonna be.
Like, well, I completely understand where you're coming from and I wanna help. Now I could go hourly, all things considered, but do you mind if I ask you a question?
If I were to do hourly and the job took longer than expected, that's to say that you're comfortable paying me more than what I originally quoted you, right?
@16:47 - Clay Neumeyer (serviceloopelectrical.com)
Right then and there, that's pretty broad, right?
@16:50 - Joseph Lucanie
Yeah. Would a customer immediately say, yes, I'm totally cool with paying an unspecified amount more than what you originally quoted me.
@16:58 - Clay Neumeyer (serviceloopelectrical.com)
For reasons outside of my control, essentially.
@17:00 - Joseph Lucanie
Pretty much.
@17:01 - Clay Neumeyer (serviceloopelectrical.com)
Yeah. Thank you.
@17:02 - Joseph Lucanie
You have no control of the situation. I get told that the material backed up by 900% and now I quote you a thousand dollars and actually it's 4,000.
@17:13 - Clay Neumeyer (serviceloopelectrical.com)
Yeah. Yeah.
@17:14 - Joseph Lucanie
It's not gonna work. Right. In addition to what have I said that I could only warranty something so long, right?
If I go hourly rate, how can I guarantee there's certain levels of reliability that goes with it? Yeah. Why should the customer work with us?
The reason they're working with us is because we become a safe bet. Now I'd be willing to pay more to be guaranteed happiness and freedom from emotional pain.
@17:41 - Clay Neumeyer (serviceloopelectrical.com)
Yeah.
@17:42 - Joseph Lucanie
Compared to someone who's saying, well, I might be less or I could be as much or I could be more and the quality you're gonna receive is gonna be variable.
Yeah. Out of those two choices, would you rather pay a little more upfront for the safety?
@18:00 - Clay Neumeyer (serviceloopelectrical.com)
knowing that you're not going to have that kind of situation. Or pay less than you should.
@18:07 - Joseph Lucanie
And that's the advantage of going flat rate.
@18:09 - Clay Neumeyer (serviceloopelectrical.com)
Yeah. Yeah. That's the challenge for sure. The other way I've looked at this many times is honestly, we're trying to productize our service.
@18:15 - Joseph Lucanie
Mm-hmm.
@18:17 - Clay Neumeyer (serviceloopelectrical.com)
Services won't really retire you that well. They're not conducive to that alone. Service work really does imply there's this time component that's fixed to it.
And I think that's where the hourly all comes from. It's the easiest, least risk situation for the contractor, but it's also the least reward.
@18:39 - Joseph Lucanie
Right?
@18:41 - Clay Neumeyer (serviceloopelectrical.com)
That risk-reward balances in every situation. So as we aim to productize this thing, I like to look at a company.
The first thing we do is shed light on this vision. Put your service on the conveyor belt. Make this like manufacturing.
And that means putting it in a little box with a bow. and price tag on it. And when you're able to do that, then you can do so consistently, and you can continue to refine that process and refine the product and as such, the value that customers are perceiving and receiving through your service.
So it really becomes service to product mindset. And when we accomplish this well, the only thing missing is the gap between really the articulation we're talking about today, understanding the benefits, and how their benefits to the customer, not just us.
This isn't a get rich quick scheme, but it is the casino principle over and over and over and over and over.
House has to win, and the best way to do that is to productize your service and make your delivery consistent, as we say, creating that premium, that consistent premium level service.
@19:57 - Joseph Lucanie
Yeah, you actually, can I have one more thing for that? Of course. You said something earlier, and I really feel like it wasn't highlighted enough.
It was, how many of us have ever gone to jobs where we quoted for the neighbor, or we quoted for the friend?
And then we go to quote for the other friend, and it's a completely different number. And they're like, wait a second, that's not right.
Like I got one situation where a client had reached out to us and said, I quoted a Tesla system for 600 bucks installation, and yet I needed to re-quote it again.
And for a friend, someone who referred someone out, and it was going to be like $2,800. And he's like, I really didn't know how to argue it.
And I realized that you're right. If you can't give the neighbor a similar price, or at least somewhere in the ballpark because you went hourly, that's going to be really hard to argue with them, right?
Yeah. So being able to say, hey, we work flat rate, a panel should cost about this much. I know what we're going to be looking at.
there's a range of options and you're gonna leave me somewhere within the range that I quoted your neighbor. Now you can always point them and be like, well, I offered your neighbor these same options as well.
Now, if your neighbor went on the premium route, now you have to keeping up with the Joneses mentality. Does anyone wanna go cheaper than where their neighbor did?
@21:22 - Clay Neumeyer (serviceloopelectrical.com)
No. So being able to be at a flat rate and have prepackaged options are also helpful. Definitely. Consistent premium level service.
Can't say it enough. Okay guys, thanks for joining. If you caught this, if something was valuable and stuck out, please let us know.
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Thank you for those watching it. Hey Greg, yes, thank you. Thank you for joining. And if you guys have faced this objection or others, if you've got a question that's burning and you want us to answer it, go ahead and leave it right there on the Facebook page and we'll talk about it tomorrow, or Wednesday, or Thursday, or Friday, or next Monday, five days a week guys, we're right here live with you.
All right, have a great week. Talk to you again soon.
@22:22 - Joseph Lucanie
Take care guys.