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One of the issues that every service business has to deal with is the customer who thinks he paid too much, and demands to see a complete breakdown of the costs for the job.\u00a0 This infrequent annoyance inevitably leads to the dilemma of revealing your costs to a customer, or alienating the customer and risking the loss of business or worse.<\/p>\n
This situation is one reason why many companies move to Flat Rate from T&M.\u00a0 With Flat Rate, your proposals and invoices give only a price for the complete job, so the breakdown issue rarely comes up.\u00a0 But, when it does, you need to respond in a consistent way that works for your business.<\/p>\n
For many companies, the response is that the price is for the entire job, and they cannot break out the individual costs.<\/p>\n
Since the founding of NSPG, we have subscribed to the policy that industry leader Frank Blau<\/a> advocates so strongly for.\u00a0 If the customer wants to see the cost breakdown, give it to him.\u00a0 Lay out the details so that he can see what providing the level of quality he demands actually costs.<\/p>\n When you install a new toilet, or a new 240V circuit, the customer has no idea what makes up your costs.\u00a0 They don’t think about the many items involved in paying for the technician, or the myriad items that contribute to your overhead.\u00a0 They don’t think about insurance, vehicle costs, utilities, office staff, and all the other items that make up your cost of doing business.<\/p>\n So, as Mr. Blau recommends, give it to them, in detail.\u00a0 Print them a list that shows your labor cost, your overhead, even your profit.\u00a0 Be sure that the list is detailed, and be sure that you explain to them why the major items are as expensive as they are.\u00a0 After all, everyone can relate to high insurance and gas prices.<\/p>\n If you’re still a Time & Material business, this can be a bit more difficult than with Flat Rate.\u00a0 Most T&M shops mark up their material costs to keep their hourly rate low.\u00a0 They shift a significant part of their costs and profit to the parts by marking them up sometimes as much as 300%.\u00a0 This is a big problem when your customers can find just about anything for sale on the internet.\u00a0 They will be able to see that you’re charging a lot more for your parts than they can buy them for on line.<\/p>\n If you’re flat rate, you don’t really have this problem.\u00a0 You don’t need to mark up your material.\u00a0 You can make your profit based on the hours you sell rather than on the material you sell.\u00a0 This can even out your profitability over all types of jobs you do, and can reduce the urge to up-sell materials to try to increase your profitability.<\/p>\n But, let’s get back to the cost breakdown issue.<\/p>\n You CAN be ready for when you face this issue with one of your customers.<\/p>\n If you decide to reveal your cost breakdown, minimize the cost to respond to this type of request by setting up a spreadsheet template that includes all of your costs that you can quickly customize for the job.\u00a0 Or, use the built in breakdown in software products like Numbers Cruncher.<\/p>\n You can’t avoid this type of situation, but you can minimize the cost and the damage.\u00a0 A little preparation plus the courage to defend your business can reduce the stress and risk you face.\u00a0 Who knows.\u00a0 You may be able to convince the customer that they made the right decision when they chose your company for the job.\u00a0 You could earn a loyal customer who respects the quality and integrity you bring to the job because of the professionalism you display in dealing with his complaint.<\/p>\n _________________________<\/p>\n Give Mike Conroy<\/a> a call.\u00a0 He can quickly walk you through the business basics that you need to help make your company more consistently profitable, and increase the value of your business.\u00a0 Mike has years of experience helping companies set their own profitable prices, respond to price complaints, track performance, implement and fine tune Flat Rate systems, and improve profitability.<\/p>\n Take advantage of Mike’s experience working with hundreds of companies like yours to help you achieve your own business success. One of the issues that every service business has to deal with is the customer who thinks he paid too much, and demands to see a complete breakdown of the costs for the job.\u00a0 This infrequent annoyance inevitably leads to … Continue reading ![\"Flat](\"http:\/\/nspg-software.com\/ads\/graphics\/MC900433821.png\" "\\"Flat")
The most likely reason that the customer asks for the breakdown is that they think you overcharged them.\u00a0 Your response should combine the detailed cost breakdown with an explanation of the value your company brings to the job.\u00a0 Highlight the quality of your work, the warranties you provide, the value of your insurance in case someone is injured on the job, the reliability of your service, and the many other benefits that running a quality, profitable business includes.\u00a0 Once the “hidden” costs of your service are revealed, the customer has a legitimate reason to cool off and accept the value that your business offers.<\/p>\n
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