March 23, 2017
The Great Flat Rate debate
There’s been a lot of discussion in the moving industry lately around flat & hourly rates. Commonly used for long distance moves, flat rates are becoming more popular for local moves. Deciding which approach is the best fit can be tricky. We’ve outlined some pros and cons to consider:
Pros of a Flat Rate Approach
More profitable: You know how long a job needs to be completed in order to stay profitable. You can raise your labor and materials rate without opposition. The quicker your crew completes the job, the higher the profit.
Accurate Move Details: a flat rate on a move forces the customer to be specific about their items. As a mover, knowing exactly what to expect will make the moving process much easier for everyone.
Less stressed customer: Quoting a flat rate guarantees no surprise charges on move day. It allows them to work a specific dollar amount into their budget and eliminates grey areas, creating value to your service beyond the time it takes to complete. A less stressed customer won’t be rushing things or trying
Cons of a Flat Rate Approach
Unseen Factors: Even with onsite estimates and detailed inventory lists, unseen factors still affect timing. Drive time, truck parking, and long carry distances significantly add to total move time and the customer can refuse to pay.
Longer Sales Process: We’ve discussed in previous posts how simplifying the booking process can help boost your sales. For large or long distances moves, onsite estimates and requiring an inventory list can hardly be avoided but could result in a loss of sales due to the lengthy process involved.
Setup time: Movers will have to go through a detailed inventory list based on the contract upon arrival. This eats into the move time and if your movers are not trained to go over everything properly they may miss somethings which can cut into profits and cause disputes with the customer.
Now let’s look at an hourly rate approach:
Pros of an Hourly Rate Approach
Paid for your time: An upside is you’re compensated for your time and the work done. It’s great for small jobs that run over estimated time due to unexpected items and ensuring that if there’s traffic or more items you’re getting paid for it.
Less work for more jobs: An hourly approach is easier for customers. From their perspective, simplicity is key. People moving have busy schedules and lack the time to handle the move on their own. Eliminating the process involved with agreeing on a flat rate can be seen as a huge plus.
Easy on Movers: Eliminating that lengthy buying process makes things easier on movers. Onsite estimates require time and money which can be risky if the customer is shopping around. Charging hourly eliminates that risk and allows you to quickly book more jobs.
Cons of an Hourly Rate Approach
Lack of Move Details: One downfall to consider is the risk of not knowing the full details of the move. Customers tend to underestimate their belongings which could result in sending the wrong truck size and having to make more than one trip.
Inaccurate quoting: You can never be certain on the exact amount of time a move will take. From a customer standpoint, this could cause surprises on move day. A larger bill than expected could result in refusal of payment.
Lost Margin: You could lose margin per job compared with flat rates, especially with smaller jobs. Small jobs can be sold at a markup price as long as it’s competitive. After figuring material and labor costs for larger jobs, this could lower your profit margin.
As for whether flat rates or hourly are the way to go the answer remains it depends. You’ll have to look at your business and key metrics to determine the best approach for your company. Keep in mind you can tailor which you’ll offer depending on your customer and type of move. What do you think?
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