T&M vs. Flat Rate

Discussion in 'Landscape Architecture and Design' started by lawnboy82, May 26, 2001.

  1. hey all. i wanna ask you something. now i am not talking for jobs that are under lets say 100 or even 200 dollars. i am talking about jobs that are lets say in excess of 500 dollars? i am finding that when i give a flat price for a job that i dont come out with that much, even if we work fast. and even if we are working fast something usually happens, or the guys can only work for so long. now i find that if i price a job for T&M the guys dont have to kill themselves when they work, they are happier, if something unexpected happens, ex. your backhoe breaks down and you need to rent one, that that machine is getting paid for no problem for as long as it is there same rate. or if you figure on one number and that number is too low, you are covered, or the customer asks you to do this, and instead of giving another price all you have to do is get it done and bill them for it. do you guys know what i am saying? i find that i make better money off of T&M i really do. however there are some things that i do still keep flat rates for.
     
  2. steveair

    steveair LawnSite Bronze Member
    Posts: 1,073

    Hello,

    for smaller jobs, I'll say 2k and less, time and materials may work.
    Also, if you know the client very well, have a very good relation, and feel confident that they trust you on your pricing, then you may be alright.

    However, as jobs get larger, time and materials will not cut it. People will want a price, and to come to them at the end of the job and say 'well, the machine broke down so I had to get another and therefore its an extra $1000' will lead to some huge problems. I can't even imagine doing this.

    As for the idea that your men can now take it easier on these jobs because they aren't rushed anymore..........that could lead to some MAJOR problems. What it, one day, the homeowner comes home, and sees your guy sitting around for a 2 hour lunch. Sure, its 100 degrees, they just busted there balls all day, and you got a lot done, but when you hand the homeowner the labor bill and they say 'all i remember seeing is your crew sitting around all day, I'm not paying this', what all you gonna do. If you have to push your men to 'extreme' work speed to make a profit all the time, then you aren't pricing the job high enough.

    If you are having trouble pricing jobs out, then you are doing something wrong. One of the hardest parts of giving estimates is coming to the conclusion that you ARE NOT charging to much. As you have learned, the unexpected does occur, and that has to be accounted for in you estimate. Experience is always a big help in determining this.

    Pricing jobs is kind of like gambling, and is a risk of the business. You can make very accurate, solid bids, but off course, there will always be a job or two that will not turn out as expected. Sometimes, you have to think of it in a yearly sense, as you may make more money on one job and less on another, but in the end, have a profit.

    As for continueing with T&M pricing, I would say move away from it. It will lead to some major problems down the road. Think the job through start to finish, add the 'fudge factor' and give the price to the homeowner. I too, feel guilty handing out some of the estimates that I have and have said "that price seems a little high". Then, 2 days into the job and something happens out of the ordinary, I thank myself dearly for the price I gave.

    steveair
     
  3. paul

    paul Lawnsite Addict
    Posts: 1,625

    T & M Do you really think it makes you money? Most guys should rethink their work if they believe they are doing good with T & M. Using Stonehedges figure of a $1000 per day per man (gross sales) I would guess your not going to come close to making that. If you say material cost you $500 of that $1000 you would have a hard time making $500 on a 8 hr day just for a laborer.

    Do we do T & M, yes but not very offen, I hate to send guys out for it but we do:( AS far as what to look for in your sales/work completed we shoot for $100K to $150K per year per man, so if your not doing that you might need to raise your sights up some.
     
  4. kris

    kris LawnSite Bronze Member
    from nowhere
    Posts: 1,578

    Rarely use T&M here... only once in a while on cleanups that the maintenace crews do... on T&M the guys have to work harder(not that they are expected to work any other way, on any job)because I find the customer is watching every move...don't want to here any complaints on guys standing around. There is no way that a customer who is forking out 40k for a landscape job, dosn't want to know the final cost upfront...crew of 3 should be grossing about 15k a week.
     
  5. greens1

    greens1 LawnSite Senior Member
    Posts: 352

    I only include T&M in the contract when it is part of a larger job. That way if the customer wants to throw in a few extras I don't have to worry about writing up a seperate contract.
    Jim L
     
  6. paul

    paul Lawnsite Addict
    Posts: 1,625

    I find it funny, "we have to work harder when we are on T & M"
    Let's look at this....... say you are charging $30 to $50 per hr. your men are costing you $ 18 to $25 per hr. and you are happy making that???? Not me I would rather figure out a flat rate than put my guys out there trying to make money that way. Think about it some..... what happens if they finish early and your charging by the hour? You're not making the money you should! Most times a customer is happier when he is getting a one rate job but he never sees that you are really charging more for that flat rate than T & M.
     
  7. kris

    kris LawnSite Bronze Member
    from nowhere
    Posts: 1,578

    paul... not sure if you were referring to my post...We DON'T do T&M unless it is to what i refered to in my post...I wish I had not said the line about working harder on T&M it is just that when guys are out on T&M it is almost like you can't even take a break or the customer is complaining...All our landscape jobs are set price(flat rate) ahead of time.
     
  8. greens1

    greens1 LawnSite Senior Member
    Posts: 352

    The other problem with T&M is how equipment usage figures into the equation. T&M works for a guy with a rake, but put the same guy on paul quad and you are in a whole different price range. Do you bill the customer only for the time the equiptment is running ? He may insist on this if he has spent the day watching you. Do you charge him for the time the equiptment is tied up, say waiting for a stone dilivery ect. ?

    The bottom line is if you know your trade, bid jobs fairly and hire reliable people you will allways have work and make good money.

    Jim L
     
  9. paul

    paul Lawnsite Addict
    Posts: 1,625

    No Kris most of us find that it just happens, because what you said is right a customer is going to look at your men or my men and complain onhow much he is paying per hr
     
  10. why would you work harder at time and materials jobs? when i do work for a flat rate i bust my butt, as do my workers, i make them work harder. however they dont work really really fast. we do good work, but it takes time. if we work time and materials we work, but we dont kill ourselves. the customer knows that they are paying for good work, so they dont mind paying like that. even today the customers gave the guys food and drinks and what not. yes a break ordained by the customer. these guys just dont want to work the 10 - 12 hour days. if they would do that then i would go for flat rates. however like yesterday it was raining and they would not work. we only got a half day in, and finished the full day out today. i really think that my problem is my workers. but they do good work and would be tough to replace after all i have put into them. so this is what i am talking about, yes we do milk the jobs. sorry!
     

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