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How to Start a Flat Rate Business

STEP 1: MENTORS

by Gene Burch, G B & Associates

FIND SOME SUCCESSFUL MENTORS, AND THEN LISTEN TO THEM!  Believe me when I tell you that if not for Frank Blau, Mike Conroy, as well as joining the PHCC and talking with fellow members as well as other people who had become successful in the business world, I never would have made it in business myself.  I really feel that success breeds success, and by working with people who have built a successful company, and implementing a system that has already been proven to work, you will also succeed.  You simply do not have the time and energy to waste on pursuing trial and error methods, while no doubt “Reinventing the wheel” for your new company.

I feel the best and easiest way of growing a business is by joining an Industry Service Group such as the PHCC, QSC, Nextar, or The Service Roundtable. These organizations and their members are dedicated to helping others succeed in business.  You will be able to tap hundreds of years of experience in business by simply picking up the phone or sending an E-Mail, you simply cannot afford to be the Lone Ranger trying to do everything yourself.

STEP 2: READ BOOKS ON BUSINESS

There are hundreds of good books out there on business, I feel Frank Blau’s “The Business of Contracting”, and “The E-Myth Revisited” by Michael Gerber are must-reads.  These books have been the Bibles for the Flat Rate industry for over 20 years.  They can be found online or at any good book store; read them and follow the concepts they convey, and you will be on your way to success.  One thing that stands out when reading them, is that you must know your costs, and create a system that runs the business, not a business that try’s too run the system.

– “E-Myth Revisited”   

“The Business of Contracting”                         

STEP 3: BUSINESS PLAN

Develop a very short and simple Business Plan for what you want too accomplish for the next 6 months.  When you reach that goal, revise it and/or start another plan for the next 6 months.  Remember; BABY STEPS, do not try do everything all at once, as it will just overwhelm you.  Just try to do something everyday, but not everything everyday.  NOTE: Include how much money you want to make per year in your plan, and do not waiver from that number no matter what happens! 

You can find some business plan software at Staples, Office Depot, Office Max, etc. for under $30.00.  Microsoft Office offers all kinds of forms and templates at no charge.  You can create a business plan in Microsoft Word, but I like having a Template because it has the basic items listed for you.  It is important to start out with doing a Business Plan, as it is the first step to creating a system to run your business.  You will be spending some time creating many other plans for your new business, so you need to get used to it.

– SRTs Annual Success Planner          

 – Various Software Programs 

STEP 4: BUDGET

You must have a complete and accurate budget that you establish and follow before you can ever have a successful business.  To establish your budget, I recommend purchasing some type of Software that will help you do so.  There are many of them out there, including several from the SRT, which I have listed below.  I also recommend using a very simple and easy to use program from NSPG, called Numbers Cruncher.  This program is designed for businesses in the Construction Industry, and will allow you to set-up your budget and ascertain your true cost of doing business very quickly.  It allows you to enter all of your employee’s labor and benefit costs, and in addition, you can determine your Technicians Productivity Ratio loss, which is usually about 50% for service work.

In the overhead section on the program, you are able to enter your Overhead costs line Item by line item.  These two parts of the program are then combined to give you an accurate Breakeven Number, which is what it actually costs too operate your company based on the amount of Productive Hours your Techs can produce every day.  Now all you have to do is add whatever profit you desire, and you are good to go with your Billable Hour Price.  This amount will be what you need to charge for every hour of labor your Techs bill out.  The program will also allow you to determine what adding a new truck or other expense affect your Breakeven Number instantly.

Now there will be no more guessing on what your costs are; you will always know whether you are charging enough for your services and making a profit down to the penny.  Warning, the first time you run your numbers & find your true Breakeven Number, you will most likely find that your new Billable Hour Rate has increased significantly from what you are currently using, & will probably be twice as high as Local “Going Rate” that many other unknowing companies are using.

This is because you have now entered your Techs Productive Hour Loss, which includes drive time, getting gas, stocking and cleaning the trucks, doing timecards and other paperwork, picking up supplies, etc.  When you are paying your Techs to do those things, they are not able to bill customers for their services, hence the Productivity Loss.  The program allows for this loss when you enter it, which is usually around 50%, which means paying them for 8 hours while they are only able to bill out 4 hours.  Finally, it is crucial that you enter every cost item for your business in your Budget, remember the customer pays for everything.

– SRTs Service Rate Calculator, Task-O-Matic, Overtime Rate Calculator & Annual Success Planner, Numbers Cruncher                                            

STEP 5: BUILDING A TEAM

To insure success with your new Flat Rate System, you must make sure your ENTIRE COMPANY is on board with making the changes needed to adopt it, for if someone is not completely comfortable with the program, they can disrupt or even setback everything you are trying to accomplish.  Everyone in the company must truly believe and understand that Flat Rate will make their jobs easier and better, and will in almost all cases allow them to make more money.  Everything you say and do needs to focus on how you are trying to make the company more efficient and profitable, as well as a better place for them to work in.  They should also feel included in what you are trying to do, for after all it is their company too.  In addition, people like simplicity and stability, and Flat Rate is a very simple and stable system.  I feel everyone in the company must have a Job Description including the owner, that way there are no surprises as far as who is supposed to do what within the company, and what is expected from them.

You will find yourself spending a lot of time working out the kinks before you get up and running, but this is just part of the gig.  Once you get everything in place, and your employees on board, you must then empower others to do their jobs with out your constant interfering; otherwise, it will just not work.  In my experience, empowerment was one of the hardest things for me to ever do.  However when I finally did, it freed me up and allowed me to run the business, and stopped the business from running me.  One thing is for certain, you will never really stop working with and training your employees as long as you are in business, it is just the way it is.

– SRTs Annual Success Planner         

Various Software Programs

 – Various Business Software Programs                                    

STEP 6: OFFICE STAFF

A very important part of the Flat Rate System is how the office is set-up, calls are taken, and the Techs in the field are dispatched.  This is usually done by CSRs (Customer Service Representative’s), who by answering the phone are usually the first contact for your customers.  To be effective, they must have a solid sales script in place so they can close and schedule the incoming calls quickly by asking the right questions, and being consistent.  There can be no adlibbing or going of track; and they must stick to the script while sounding natural.  That is their job, therefore, IF YOU ARE THE BOSS, KEEP OFF THE PHONE!  Answering the phone is not your job, it is the CSRs.  The reason being other than losing calls, the Boss will many times give away the store, while breaking every rule they have set-down for the rest of the company to follow.

Going back to The E-Myth Revisited, the owners and/or managers job is to make sure an efficient system is in place and is in fact actually running the business.  As a result, they just do not have the time to micromanage every single thing that goes on; the system is supposed to do that.  If it does not or cannot, then it must be tweaked until it does.  This process will keep you extremely busy for the first 6 months or so while you are getting up and running, and must be done or you will just end up putting out fires all day long.  You have not seen chaos until you have seen someone try to start Flat Rate up with out a system in place to operate it, and employees who do not really understand and/or believe in it.

– Dispatching Software           

In House Sales Program                       

– Telephone Script                                                                                               

STEP 7: FIELD TECHNICIANS

To insure you have a successful company, you must also have successful Techs.  They must know their respective trade or trades, as well as being clean, courteous, and people friendly.  They also need to have sales skills, which will allow them to offer solutions to the customer’s problems by showing them the features and benefits of various products and repairs.  Their job description requires that they are always looking for a way to offer true value to the customer, in every thing they do.  In order to insure the Techs maintain this high standard of service, it is necessary to spend some time going over any new products or changes as well as the proper job procedures with weekly or bi-weekly training sessions.

One way to handle this, is to use Charlie Greer’s “Tech Daddy” DVD Series for your weekly shop safety & sales meetings.  The DVDs go over all of the different situations that the Techs will come across when dealing with customers during their working day.  This allows the Techs to become comfortable in dealing with any issues that then might come across before it happens.  Another must do is having Role Playing between the Techs, where they actually go through various job situations.  These are not easy for most Techs to do at first, but it really allows them to become confident in their sales techniques, as well as learning what Tasks and Add-ons to use, and where they are located in the Flat Rate Books.  Roll Playing also insures everyone is on the same page with the company procedures when dealing with the customer.  It also allows you to see just what the Techs are doing on the job, which is huge.  The DVDs are just a great tool for a Sales Training program which is also mandatory for Flat Rate to succeed; and is very inexpensive compared to getting some “Sales Guru” to tell them the same things which they will forget most of in the next week or so.  With the DVDs, you can now go over an issue as many times as you wish, whenever you wish.  

– Weekly Training and Safety Meetings   

Vender/Supplier DVDs                      

– Sales Training DVDs               

 – Supply House & Factory Reps.                    

STEP 8: PAPERWORK / INVOICES / ETC.

In order to manage Flat Rate properly, you will need to track the hours billed by each Tech every day.  This is done by making Daily Time Cards mandatory, which will insure an accurate assessment of everyone’s productivity.  You will also need Job Invoices that will meet your States legal requirements, and insure that you are not going to have any legal problems in the future.  As far as the other paperwork you will need for Flat Rate goes, it is pretty much what you would need to run any Plumbing, Heating, or Cooling business.  You must be careful not to bury your company in paperwork; however, you need to make sure that every piece of paperwork you are using is insuring productivity.

Once you start getting your paperwork in order, you need to start using binders to file important forms and other items you have been doing for your business.  This binder will be an easy to find source of information over the years when you need to find, add, or change many of the things you have created.  It should also have copies of your business Licenses, Specialized Training Certifications, Yearly Budgets, Company Job Descriptions, Business and Community Awards, Advertising and Marketing Plans, Appraisals, etc.  Also, when the time comes to sell your business, you will be able to offer a turnkey operation with everything the new owner will need to insure continuity in their new business in one or two binders, along with your Flat Rate Books.  It is important to remember, that everything you do for your business is designed for the selling of it in the future.  Even if you are going to pass it on to your family, you will need all of the necessary information to avoid hours and hours of labor finding everything to make a simple and speedy transfer. 

STEP 9: FLAT RATE BOOK SYSTEM

I believe you should purchase a PRE-PRINTED Flat Rate Book, do not try to layout and create one yourself unless you have hundreds of hours of free time to spend and no family to be with.  After you have the book, all you have to do now is put in your already established Breakeven Number plus Profit, and get started.  However, you must take some time and go over all of the Task and Add-Ons labor amounts, as well as the material amount and costs for any Flat Rate book system you purchase.  I am always beating the drum for getting started ASAP, but it does no good to take a book out into the field that has the labor amounts in the Tasks and Add-Ons wrong, as well as the material pricing incorrect.  Why would you want to install a water heater when the price might be $200.00 less than it should be, and the time allowed for the job is 30 minutes short?

With all of these books, as with everything else in life, you get what you pay for.  So do some research and purchase one that is easy to use and up-date, and the company is easy to deal with.  You just do not want too get caught in Flat Rate Book Printing Hell!  Just except the fact that you are going to have to spend some time and money getting and setting up your books, as well you should.  It is the very lifeblood of your new company; do you really want to short arm this key component to your success?  Do not trust anyone else to do this, it is your responsibility to know if the labor, material, and pricing is right for every thing in the book, no one else’s.  A bookkeeper for instance does not know what it requires to do Plumbing, Heating or Cooling work, so they will end up guessing or bugging you for help every 10 minutes.  If it takes 2 or 3 weeks or months longer but it is right, it will end up saving you years worth of grief and heartache in the future.

–  SRT Customer-Friendly Flat Rate Program –   NSPG Flat Rate Books       

MARKETING AND ADVERTISING 

  Marketing and Advertising programs for Plumbing Heating and Cooling companies has changed dramatically over the past 20 years or so with the advent of the Internet.  For many years all you had to do was take out an ad in the Yellow Pages, and you were good to go.  However, the Yellow Pages are losing their grip as an information source for many people.  They choose instead to use the Internet and electronic media as their main source for finding service companies, restaurants, reviews from previous customers, etc.  As a result, for most companies today it is all about having your own Web Page, along with doing something with social media like Facebook and Twitter.  Actually, this is a good thing cost wise as these things are usually less expensive than the Yellow Pages, however it does require some time on the companies part to keep everything up-dated and current.

Therefore, those are the steps, now the rest is up to you, if you want clean well-painted trucks then put them in your budget and get them.  If you want uniforms for your Techs, which I feel is mandatory, put those in your budget and go with it.  Just always remember the more money you charge for your services, the more value you must offer and provide for those services.  You must also make sure you constantly put our own personality and feelings into all of this, for leadership always comes from the owner’s personality and values, as well as what they desire.  It does not come from some “Gurus” vision of what they would like.  Every company is different, because every company has different people who own and/or manage it, and employees working in it. 

– SRT & Their Vender Programs  

Mike Morosi (Contractor 20/20)                     

-Marketing & Advertising Training DVDs  

Vender/Supplier DVDs                      

Some added random thoughts:

1. Like an old Plumber told me in 1959 when I first started in the Plumbing Business, “Preparation is 90% of the job.  “If you are prepared, you will do fine, if not, you will be running non-stop trying to catch your tail”.

2. The Flat Rate Business System is all about Billable Hours at the proper rate.  Therefore, the entire company must just focus on how many Billable Hours the Techs need to bring in, not how much money they need to collect, whether you have no employees or a 1000.  From now on the company must bill X amount of hours per day, week, month, & year.  This is non-negotiable, & is the very lifeblood of the Flat Rate Business System!

3. If your Numbers are right, you use top quality materials, with the best service you can provide, you will succeed.  However, you cannot do this & not charge enough to cover it & make a profit.  This sounds simple, because it is simple.  You will lose some customers when you go Flat Rate, and not all of them will be bad ones.  This is the price you will have to pay for finally making a profit.

Just my thoughts,

Gene Burch, G B & Associates