Flat Rate Vs. T&M

I just finished reading the latest edition and would like to add my two cents. In my opinion, Ken Secor speaks about something he has never tried either through ignorance or lack of "true grit," which is what's needed when we try something "outside of the box."

My observation is based on the fact that I have personally been involved in both flat rate and time & material in my nearly 50 years in the trade. As a former owner-operator of a very successful plumbing, heating and cooling service business now owned and operated by our two sons, I think I can speak with some degree of experience.

I had a dream many years ago that our plumbing service industry could be changed from the crude operation run by most of us into something truly professional that provides value to our customers and, at the same time, elevates the dignity of our employees, ourselves and the trade itself.

I knew that in order to be successful with this endeavor we must set the pace and be the leaders in our area since nothing like it existed in my trading area. This meant getting away from the perceived mentality of our customers that we operate out of a hole in the wall with a bag of pipefittings and old fixtures covered with dust in our front office.

This meant retiring the greasy bib overalls and replacing them with neat, clean uniforms worn by well-groomed, well-trained and well-paid service technicians. This, of course, also meant getting rid of the old rust buckets and replacing them with new clean, well-lettered, state-of-the-art service vehicles controlled by a computerized dispatch system that would enable us to maximize the efficiency of our people as they roamed around a large metropolitan market area.

But most important of all we must provide our customers with a professional level of service they had never experienced before.

We knew this was going to cost a fortune, but we also knew we had to make it happen. The very first thing we did was to concentrate on exactly what we wanted to do and that was providing plumbing and heating services. We knew it was not possible for us to be service people and, at the same time, continue contracting larger projects, robbing men off the larger jobs to run out on service calls or vice versa. In either case, a customer is always unhappy.

My mind kept bringing up the guys in the professional automotive service business where the customer brings his car in for a brake job and the service manager simply opens his "flat-rate" manual and quotes "in advance" the total cost for the job -- period. I further pondered the professional auto body shop guys and how they also quoted up front the total costs associated with making the repair right out of their shop manual. Why couldn't we do that in our industry the very same way?

About this time, while at a state plumbing convention, I was chatting with a fellow member about this problem and he said he knew of a guy in Milwaukee named Frank Blau, who was light years ahead of the rest of us and currently had many service trucks rolling. I was on the phone to Blau Plumbing the next day chatting with Frank about my problems and guess what? He invited us down to take a look at his operation (all at no charge). My wife Darlene and son Tim (now president of our company) both jumped in the car with me as we raced across Wisconsin on a Sunday afternoon to visit this very open and helpful contractor to see what we could learn. The next morning at about 6 a.m. Frank was at our motel raring to go.

We spent a busy day with Frank learning about how to actually determine our cost to do business by including "all" of the various costs associated with running a well-oiled business, including our own retirement. Meanwhile, Tim was out riding a service truck with one of the Blau techs and came back excited and amazed. As a matter of fact, we were all amazed in seeing a professional plumbing service business really working. Frank had mastered the same concept as the automotive and body shop guys and had developed a service manual for plumbing and heating service.

The rest is history. We drove back to the Twin Cities on cloud nine trying to calculate in our minds a time table to be up and running with our very own pricing manual based on our own cost to do business. Please remember that our previous selling costs were not based on our cost to do business, but rather were excised from a norm of what other contractors in the Yellow Pages were charging with the theory that they must know what they are doing. Sound familiar?

Once we had our eyes opened as to exactly what an hour costs us we couldn't move fast enough to stop the flow of red ink. Of course, the mindset is that we will lose all our hard-won customer following, but the exact opposite proved to be true as we went from a three- to four-truck operation to a 10- to 12-truck operation in what seemed like an incredibly short period of time. Business was booming and red ink was replaced with black ink. This business had now become exciting and fun.

Darlene and I stepped down a few years ago and are enjoying a comfortable retirement with warm Florida in the winter and the cool lakeshores of Minnesota in the summer. Without the radical change in our business mentality and the courage to do it, the chances are good that we would still both be working until they lowered us in the grave. I see many of my close plumbing friends still working and the only retirement they have to rely on is Social Security.

Now for all of you "doubting Thomases" out there, why not gather up the courage to better your life and that of your employees and take an honest look at a truly better way of doing business? It is not too late, and yes, it will work in your town no matter what the population. How? Start by being totally open to change and dissect your business in order to really know, with an absolute certainty, what your hourly cost to do business really is. Do you have the courage? Or will you simply keep cruising along finding fault with those who have discovered and acted upon a better way? Come on, get out of the box.

Tom McGuire, (Retired)
McGuire & Sons Plumbing-Heating-Cooling
Hopkins, Minn.

No Advantage To Bigness

This statement will infuriate contractors who look at their roster of tooling, trucks, computers, inventory, accounts receivable, etc., etc. But it is still true. And yes, one of the giants can do bigger work than our dinky operation, but they cannot do our size job for a significantly lower cost than we can.

Sure, it sounded good when the consolidators originally started talking about "economies of scale." But what are they going to do -- buy 6-inch gate valves cheaper than I can? Answer: Sure, they can. But at enough advantage across the board to support the costs of the overarching organization? I think that the answer is obvious: There is not enough of these advantages to support the central group, much less produce a return on investment that justifies that central group.

Dick White
Repairs Inc.
South Bend, Ind.

Mold: The New Asbestos

Today a plumber is faced with confusing paperwork, laws and restrictions for even the most menial task. For instance, if a bathtub drain must be replaced in a 50-plus-year-old home, the plumber must a) submit a notice to the client that lead paint may be released while sawing through the wall; b) asbestos fibers may be released into the air if the ceiling is disturbed; c) there should be a reasonable time for moisture to dry out lest it becomes a mold concern when the wall/ceiling is hastily patched; and d) notice of a right to cancel and seek other estimates must be provided to the consumer if the aggregate job cost exceeds $500.

Another option for somebody who is fed up with rules is to operate without a license. Nobody can revoke something you don't have. If you get sued, file bankruptcy. It happens often and it's too easy to shirk responsibility. Don't worry about getting caught. Terrorists get visas and renewal notices after steering airplanes into buildings. Of course, I am being facetious. It just seems that for every good intention, there is a consequence.

Joe Nernberg
AmeriSpec Home Inspection Service
Agoura Hills, Calif.

Clarification