CRA Business Profitability Explored
By Maraya King
When is the right time to charge a fixed price instead of hours, because if your collision repair shop is billing every operation in hours or fractions of hours, you could be missing out on a major income opportunity?
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Kedma Ough, a former director for the federal government’s Small Business Administration and current chief funding officer at Target Funding, a system to get money and resources, says charging flat or predetermined rates allows your company to compete on a fair level of knowledge and experience.
“You’re building a sense of culture,” she says. “You don’t want to be the lowest labor price, you want to be the best value.”
Here are her tips for the trade.
As told to Maraya King.
Offer packages where you can.
While no two jobs are the same, there are certain steps that need to be completed throughout each and every repair. We recommend our clients quantify basic packages wherever they can.
By bundling routine operations into a package, collision repair shops can charge more for their services, while keeping customers informed about the next stages of the repair process.
Don’t shock the customer.
When your shop is ready to implement going from hours to a flat rate, it is imperative that you notify your customers beforehand. We encourage our clients to communicate the internal changes with your customer base at least 60 days before they take effect.
For a successful transition, you must clearly communicate to your customers that the procedures are not changing—the service is improving. Our past clients have worked with marketing teams and even recorded their own at-home videos to explain how the service is improving and outline where the money is going.
Thank yourself later.
One benefit that our clients have found by charging predetermined rates is the ability to project future finances more accurately. Charging predetermined rates can give your business a baseline for its revenue, rather than relying on a certain threshold of labor hours that can be harder to predict.
Charging predetermined rates has also helped our clients improve the overall culture of their companies. When charging hourly, it is hard to quantify the value of the work. But by setting predetermined rates, shops can reflect the level of education, experience, and equipment they offer through their prices.
Flat Rates in Action
William Parkins, general manager of Metro Auto Rebuild in Seattle, Wash., says his shop charges predetermined rates for repeatable procedures to save time, headaches, and even bring in a little extra money. Here’s how:
Bill predetermined rates for redundant actions.
For certain services, Parkins says collision repair shops can and should charge predetermined rates. At his shop he charges flat rates for scans, car covers, tint and color, structural alignments, and set up.
When it comes to scanning, Parkins says they use asTech and charge a predetermined rate for each scan, in addition to labor hours. Pre-repair scans cost a predetermined rate of $62.50, and post- repair scans cost $149, each with an additional charge for one hour of labor, he says.
At Metro Auto Rebuild, scanning German vehicles costs more than $100, but scanning Japanese vehicles costs less than $100. Though the true cost to scan may vary between an OE’s various models, Parkins says it’s not worth the time to break it down model by model, so by charging a predetermined rate per OE, he saves time, which he says ends up saving him money.
He says charging predetermined rates for redundant actions, like scanning and alignments, is helpful because he can’t afford to have each technician clocking in and out for every action they do.
Charge based on your location.
When charging your own predetermined rates, Parkins says it’s important to note where you’re located.
For example, if you remove the hood from a car in Seattle, it would only take you an hour. In the Dakotas, it would take you that same amount of time, but it would cost significantly less than the same operation in Seattle.
Pricing almost always varies by state, he says, so if your shop decides to charge predetermined rates, make sure you’re billing enough for your area.
Article Credit to Fender Bender.
Do you think charging a fixed or a full package rate for certain services will offer additional income opportunities for your business? How easy would it be to implement fixed prices in your business? Let us know in the comments below. Also, if you found our content informative, do like it and share it with your friends.